Spotlight on the Bank of England interest rate decision
The Bank of England (BoE), takes centre stage today, with its monetary policy meeting scheduled to be held in a few hours. The central bank is expected to remain on hold following the rate cut introduced just last month, in the wake of Brexit vote. On the data front, UK’s retail sales dropped less than expected for August.
Today’s session looks busy throughout the day, with plenty of data points from the US and Euro region yet to see the light. In the Eurozone, trade balance and consumer price index (CPI) data will attract a lot of market attention. Across the Atlantic, the US data docket is filled to the brim. A string of data releases such as retail sales, weekly jobless claims, industrial production and existing home sales, to name a few, are on tab today.
Pound Sterling – UK Markets
The Pound has retreated from its previous session gains against the greenback this morning. The just released data showed that UK’s retail sales fell less than anticipated in August, after posting a stronger than expected gain in July. Market participants will now divert their attention towards the much-awaited BoE interest rate decision, scheduled to be announced in a few hours. The central bank went all out with its easing measures at last month’s meeting, slashing the key interest rate to a record low of 0.25% and expanding its asset purchase programme. Fast forward to the present and the BoE is expected to maintain status quo at today’s meeting. Investors will also aim their sights on the meeting minutes, which will be released at the same time as the policy decision.
Yesterday, Sterling ended higher against its major peers, after UK’s latest labour market report did not display any trace of Brexit shock. The nation’s jobless rate held steady at an 11-year low of 4.9% during the 3 months to July. However, wage growth slowed during the period.
US Dollar – US Markets
The greenback is trading on a stronger footing against the Pound and the common currency this morning. The US economic calendar is set to unveil a slew of data points today. Market participants will closely monitor the nation’s advance retail sales, industrial production and weekly jobless claims data, scheduled to be released later in the day, for further direction in the US Dollar. In addition, the New York Empire State manufacturing index and the Philadelphia Fed manufacturing index, due later today, will be on investors’ radar.
Yesterday, the US Dollar declined against most of its major peers. Data released in the US revealed that the mortgage applications jumped last week. In other economic news, the nation’s import price index declined in August, falling for the first time in 6 months as petroleum prices dropped, indicating that historically low crude oil prices continued to weigh on inflation. The export price index also unexpectedly dropped in August, recording its largest decline since January, as prices fell for both agricultural and non-agricultural exports such as cars and capital goods.
Euro – European Markets
The shared currency is trading on a weaker footing against the US Dollar and the Pound this morning. Investors await a couple of first-tier economic data releases in the form of trade balance and CPI from the Eurozone. The region’s trade surplus is expected to narrow in July. Further, the Eurozone consumer prices are likely to post a recovery from deflation in August. However, the annual rate is anticipated to hold steady and the core reading is expected to come in unchanged at less than half of the European Central Bank’s target, hammering home the fact that the central bank’s stimulus is not having the desired effect.
Yesterday, data showed that the Eurozone’s industrial production surprisingly declined in July, indicating that the region’s industrial output will contract over the third quarter as a whole. Separately, the ECB’s Executive Board member, Sabine Lautenschlaeger, stated that the central bank should be patient enough to assess the real impact of its current monetary policy easing measures before introducing anything new.
Other Currencies – Highlights
The Swiss Franc is trading lower against the US Dollar this morning. The Swiss National Bank (SNB) held benchmark interest rate steady at a record low of -0.75% and reiterated that it is prepared to intervene in currency markets if needed. Further, the central bank downwardly revised its inflation forecasts for the next 2 years, in comparison to the June forecast.
In other economic news, Switzerland’s ZEW economic sentiment index rebounded for the first time in 3 months in September. On the other hand, the nation’s Federal Statistical Office reported that producer and import prices dropped more than expected in August, falling for the second consecutive month. However, on an annual basis, producer and import prices dropped at a slower pace in August, compared to July’s decline. Going ahead, there are a couple of economic releases lined up in Switzerland next week. This includes the nation’s trade balance data and the SNB’s third quarter bulletin report.