UK’s Autumn Statement and US Data in Focus
Dovish comments by the Bank of England (BoE) Governor Mark Carney yesterday that interest rates are likely to remain low for an extended period weighed on the Pound. Today, UK Chancellor’s Autumn Statement will be in the spotlight, wherein the British Finance Minister will unveil budgets for government departments for the next five years and could also revise the nation’s medium term inflation and growth forecasts. Data wise, the just out BBA figures showed that the number of UK mortgage approvals rose less than expected in October.
Another focus for investors will be a deluge of US economic data later in the day, including the latest durable goods orders numbers, core personal consumption expenditure index and personal spending data ahead of the Thanksgiving holiday tomorrow.
Pound Sterling – UK Markets
Yesterday, the Pound nudged lower against the major currencies after the BoE Governor Mark Carney and some other MPC members testified before the UK Parliament’s Treasury Committee on the nation’s inflation and the economic growth outlook. Known as the MPC’s most dovish member, Andy Haldane, the central bank’s Chief economist reiterated that the BoE needs to be ready for a rate cut given the absence of price pressures and a prolonged period of weakness in global growth that could add to the downside risks to British economic growth. However, the BoE Chief didn’t parrot his views and instead stressed that rates were likely to remain low for some more time.
Shifting focus to today’s events, UK Chancellor’s Autumn statement scheduled shortly will take the limelight today. Of particular importance would be Chancellor’s decision on whether he maintains the size of its budget surplus planned for the final year of Parliament considering the weak performance of the public finances this year. Data wise, the just out BBA publication revealed that mortgage approvals for house purchases rose less than estimates for October.
US Dollar – US Markets
The US Dollar is trading in a tight range against the Pound and the Japanese Yen this morning, recovering from its earlier losses. Looking at the US docket today, it is a busy day with a flurry of US economic reports scheduled as traders head for a Thanksgiving Day-break from tomorrow. Three reports – durable goods orders, personal income and spending and the weekly update on jobless claims will be the stand outs as they will provide more fodder for deciding whether a rate rise announcement is still likely at the Fed’s policy meeting next month.
Yesterday’s upside revision to the third quarter US GDP reading came on the back of a fairly strong buildup of inventories. Markets anticipate today’s update on new durable goods orders for October to post its first monthly increase since July which could temper expectations of acceleration in growth in the final three months of 2015. Also, the consumer sector is on track to paint a positive picture for October, with both spending and income growth estimated to expand at the onset of the fourth quarter.
Euro – European Markets
Yesterday, the shared currency erased most of its losses against the Pound following dovish remarks by BoE officials while testifying before the UK Parliamentary committee about the latest quarterly inflation report. The suggestion of an interest rate cut by the BoE and Governor Mark Carney’s argument that the benchmark interest rate could remain low for a longer period rendered concerns surrounding the ECB’s plans to further expand its already massive monetary policy less extreme. Also, confirmation that the German economy expanded in the third quarter and an unexpected improvement in the German business morale for November buoyed the Euro against the major currencies.
This morning, the shared currency has erased part of its gains against the US Dollar and the Pound. On the data front, Italy’s industrial orders and sales data continued to decline in September, adding to weakness in the Euro earlier today. In separate data, French consumer confidence remained steady and in line with market consensus for October. Going forward, Italy’s retail sales data for September is due in a short while.
Other Currencies – Highlights
The Japanese Yen has currently surrendered part of its gains against the US Dollar. In domestic news, minutes of the Bank of Japan’s (BoJ) latest monetary policy meeting highlighted a lingering worry among the board members about the nation taking longer to achieve its inflation target, suggesting that the central bank’s quantitative easing programme had been ineffective. Some of the policymakers attributed the delay in reaching its goals to a slow improvement in the output gap, however, these concerns were not shared by a majority. The minutes also notified that the BoJ members believed that Japan’s economy will continue to recover moderately, while most members agreed that the economy was likely to grow at a slower pace in FY 2017 on account of a sales tax hike.
In the session ahead, a raft of macro data in the US including the notable durable goods orders print could have some impact on trading in the US Dollar – Japanese Yen currency pair.