Yesterday, the BoE Governor, Mark Carney, reiterated that the central bank was moving closer to increasing interest rates, although the exact timing will be dependent on the nature of economic data in the nation. The hawkish comments from the BoE Chief lent support to the Pound against the majors. With little on the domestic economic deck today, markets will eye some crucial economic releases in the UK due next week for further direction.
With the ECB President reiterating his dovish stance and recent macro data in key European economies showing headwinds in recovery, next week’s consumer price inflation data from major European economies along with the ECB’s monetary policy meeting will be closely watched.
Pound Sterling – UK Markets
The Pound nudged higher against the majors yesterday after the BoE Governor, Mark Carney, indicated that the central bank is “moving closer” to increase its benchmark interest rate. Additionally, he reiterated that the exact timing of rate rise will depend upon the economic data and pledged that increases would be limited and gradual. Furthermore, the BoE Deputy Governor, Minouche Shafik, in an interview, also shared similar views. However, the upbeat US jobless claims report bolstered hopes for a sooner than expected rate increase in the world’s largest economy, limiting gains in the Pound-US Dollar pair. Meanwhile, data released by Hometrack overnight indicated that the growth in UK house prices stalled for the first time in 18 months for September. In the wake of mixed UK housing market data, markets will keep a close watch on today’s Financial Policy Committee’s quarterly meeting, although the statement would be published in the upcoming week.
In the absence of major economic releases at home today, a string of crucial UK macro data next week, especially revised economic growth data and PMI reports, will keep investors on their toes.
US Dollar – US Markets
The greenback is trading in a tight range against the majors this morning. The macro data scheduled later today is expected to show an upward revision to the final US GDP reading for the second quarter due to higher spending in healthcare and construction sectors. Strong GDP data for the second quarter is likely to reduce the burden of high growth expectations from the remaining quarters of 2014. Additionally, the revised reading of Reuters/Michigan sentiment is anticipated to show an improvement in consumer morale for September. With domestic sentiment likely to remain close to its pre-recession highs, markets will eye next week’s crucial labour market report for further direction to risk appetite.
Yesterday, the US jobless claims report showed that the number of first time unemployment beneficiaries remained below market estimates for the second week in a row. Meanwhile, another report showed that durable goods orders declined more than expected for August. However, considering the volatile trend in durable goods orders data lately, this macro trigger failed to have an impact on the greenback.
Euro – European Markets
The common currency lost ground against the majors in yesterday’s trading session following dovish comments from the ECB President, Mario Draghi. He stated that the central bank stands ready to implement additional stimulus measures in the Euro zone, if needed. In the light of ECB’s ultra-dovish tone to do whatever it takes to improve inflation along with the recent unexpected stimulus measures, the prospects of further monetary easing cannot be ruled out. However, the Euro recovered its losses in the latter half of the trading session.
The GfK report released earlier today showed that consumer confidence in Germany deteriorated more than expected for October. With consumer morale showing another consecutive decline for 2014 and considering Germany’s political clout in the Euro zone, concerns have heightened that the ECB could spur its easing programme. However, the Euro showed little reaction to today’s macro data and continued to trade in a tight range against its key peers. Going forward, markets will keep an eye on Euro zone’s crucial inflation numbers and the ECB’s policy meeting next week for further direction to risk appetite.
Other Currencies – Highlights
The Japanese Yen lost ground against the greenback in today’s trading session after data released earlier today showed that Japan’s consumer prices rose at a slower pace for August. This was in contrast to the recent comments from the Bank of Japan Governor, Haruhiko Kuroda, that the nation’s inflation is growing as per the central bank’s timeline and the economy is ready for another sales tax increase.
Meanwhile, the Japanese Yen is likely to remain supported against the majors in the session ahead amid reports that the Russian government might confiscate foreign assets in its country as a retaliation to the recently imposed US and EU sanctions. Markets will keep a tab on today’s US revised GDP numbers and the Reuters/Michigan consumer confidence survey for further direction to the US Dollar-Japanese Yen pair. Going forward, next week’s Japanese unemployment rate for August will attract considerable attention as it has already risen for two consecutive months post April sales tax increase.
US Dollar Continues to Outperform European Rivals
Pound falls further
British Pound Suffers Losses Ahead of Tuesday's Critical Vote