Focus on BoE and ECB Policy Meetings
Today’s Halifax housing market report in the UK did not stoke any volatility in the Pound as market participants remained focused on the BoE and the ECB policy meetings scheduled later today. Investors will look for hints to the timing of an interest rate rise in the UK amid prospects of an easing trend in Britain’s consumer price inflation going forward. Meanwhile, investors in the Euro will keep a tab on the ECB President’s post-meeting press conference to gain insight into the possibilities of an outright bond purchase programme in the Euro bloc amid prospects of deflation in the region.
Across the Atlantic, tomorrow’s official labour market report holds prime importance, particularly after the ADP report released yesterday missed market estimates.
Pound Sterling – UK Markets
The Halifax report out earlier today showed that house prices in the UK grew less than expected on an annual basis for three months ended November, seemingly in response to the BoE’s earlier measures to control the overheating housing sector in Britain. Going forward, markets will keep an eye on the BoE policy meeting scheduled later today where MPC members are expected to keep the current policy stance unchanged. Two policymakers of the MPC are likely to remain in favour of an immediate interest rate rise in the nation. However, other members are unlikely to join the bandwagon, especially after the tone of the latest quarterly inflation report was visibly dovish.
Yesterday, the Pound gained ground against the majors following the release of services PMI data in the UK which showed that the pace of services sector activity propped up more than anticipated for November. Additionally, the British Chancellor, in his autumn forecast statement, raised the 2015 economic growth forecast on the UK economy to 2.4% from 2.3% predicted earlier. Meanwhile, he indicated that certain measures would be implemented to cut public spending.
US Dollar – US Markets
The greenback lost ground against the Pound yesterday amid mixed economic data in the US and encouraging macro reports in the UK. The ADP employment report showed that the number of job additions in the US private sector was less than market expectations for November. Data further revealed that a major chunk of jobs were added in the nation’s services segment and the hiring pace among small firms remained robust last month. With private sector employment in the US showing signs of a slowdown, traders will eye tomorrow’s official labour market numbers for a better insight into the nation’s employment health. Meanwhile, the ISM non-manufacturing PMI reading showed that the services sector in the US expanded more than expected for November. With both ISM manufacturing and services sector indicators showing that the pace of domestic activity remained well supported, prospects have strengthened that the US economy might remain resilient to a global slowdown.
Going forward, investors will eye today’s US initial jobless claims data for the previous week, especially after first time claimants rose unexpectedly last week.
Euro – European Markets
Data released earlier today showed that the unemployment rate in France increased more than expected for the third quarter. However, the Euro has shown little reaction to today’s weak data as market participants remained focused on the ECB’s policy meeting scheduled later today. The central bank is expected to keep its current policy stance unchanged and not announce any new stimulus measures in the meeting. However, traders will keep a tab on the post-meeting press conference by the ECB President, Mario Draghi. Amid recent downbeat macro updates in the region and the increasing reluctance of Germany to widen stimulus measures for the region, investors will look for more clarity in the ECB’s policy stance going forward. Additionally, with the TLTRO auction scheduled next week, comments from the ECB Chief will be scrutinised to ascertain any modifications to the loan offerings.
Yesterday, the Euro lost ground against its major peers following downbeat economic data in the Euro bloc. Data showed that Euro zone’s services PMI was downwardly revised for November and retail sales in the region rebounded less than expected for October.
Other Currencies – Highlights
Data released earlier today showed that retail sales in Australia improved more than expected for October. Additionally, another survey indicated that trade deficit narrowed for October amid an increase in commodity exports and a fall in fuel imports. However, the Aussie Dollar continued its downward trend against the greenback this morning, in response to yesterday’s soft GDP report. Data showed that the Australian economy grew at a slower pace for the third quarter amid weak performance of construction and services sectors. Signs of a slowdown in Australia is likely to raise concerns among investors, especially after the Reserve Bank of Australia Deputy Governor recently hinted at the prospect of an interest rate cut in the nation.
Going forward, tomorrow’s official labour market report in the US is expected to attract considerable attention among market participants.