Sterling has failed to recover from yesterday’s weakness against the US Dollar, following the surprisingly dovish comments by the Bank of England (BoE) Governor and lowering of the outlook for UK economic growth. In today’s economic news, industrial production data for September indicated that small signs of revival witnessed in August faded at the end of the third quarter although manufacturing output picked up. Across the Atlantic, the nonfarm payrolls report will be released in the session ahead. A better than expected print could trigger a fresh rally in the US Dollar against the Pound and almost seal in a December rate rise.

In Europe, German industrial output unexpectedly slumped in September following weak demand from emerging nations.

Pound Sterling – UK Markets

The BoE surprised Sterling investors with its dovish tone yesterday. The UK central bank’s monetary policy committee, led by Governor Mark Carney, voted in majority to keep its key interest rates unchanged. However, the real blow came in from the BoE Governor’s reluctance to reiterate the possibility of the bank raising its interest rates at the turn of the year and instead estimating the pace of rate rise to be more gradual and limited. The BoE ‘Super Thursday’ events and subsequent comments by the Governor Mark Carney added to downside pressure on the Pound against its key peers and pushed Sterling – US Dollar currency pair below the 1.53 mark yesterday.

The just released UK industrial production data for September adds to evidence as to why the BoE stood pat and downwardly revised its growth forecast yesterday. Strong Pound and concerns of a slowdown in emerging markets resulted in weaker than expected industrial output growth for September, signalling that overall economic recovery slowed down in the third quarter. Meanwhile, UK manufacturers clocked in bigger than expected output for September.

US Dollar – US Markets

The US Dollar is trading broadly higher against its major currency counterparts this morning with investors treading with caution ahead of the closely monitored US government’s October employment report scheduled for release later in the day. The Federal Reserve (Fed) Chairperson, earlier this week, had explicitly mentioned that December meeting was a “live possibility” and the decision on raising rates will be dependent on the upcoming economic data releases. As a result, today’s nonfarm payrolls report will have a huge bearing on market expectations of a Fed rate rise next month and could subsequently trigger volatility in trading in the greenback against its key peers. A strong jobs report is needed to keep the Fed’s rate rise plans before the end of this year firmly on track. Any figure above expectations for job growth in October could reinforce optimism for an end of the year rate increase.

Further, market attention will also be on the average hourly earnings data and unemployment rate for more cues to gauge the state of the US labour market. Also on tap would be US consumer credit data and two FOMC member speeches due later today.

Euro – European Markets

German industrial production data published earlier today added to a recent list of disappointing prints from Europe’s biggest economy. This time, German industrial output, unexpectedly contracted for September as the nation grappled with a slowdown in China and other emerging markets, which are its key export markets. Yesterday, German factory orders had unexpectedly retreated in September, marking its third consecutive month of decline. With the German manufacturing industry experiencing headwinds especially because of slowing growth in emerging markets, companies will have to shift its focus towards strengthening domestic spending to fuel prospects of economic growth in the final quarter. The downbeat data, however, had little influence on trading in the Euro – US Dollar currency pair as traders wait on the sidelines ahead of today’s notable US jobs report for direction.

Separately, the ECB Chief yesterday stated that the central bank’s QE programme so far has been effective and might be extended for a longer period after reviewing the economic situation at its December meeting.

Other Currencies – Highlights

The Loonie is trading almost flat against the US Dollar this morning, with traders of the currency pair eagerly awaiting nonfarm payrolls numbers from the US and employment report in Canada which are scheduled later today for direction. Canada’s employment report is anticipated to show job gains for October, closer to previous month’s level. Meanwhile, in the US, markets will be looking for higher than expected rise in nonfarm employment numbers, bolstering speculation for the FOMC to raise rates in December.

The Canadian Dollar had come under pressure earlier this week after Fed Chairwoman had reintroduced the possibility of a Fed rate rise in December. Also, a significant drop in oil prices in the last two days following news of crude inventory buildup in the US pressured the Canadian currency. On the economic data front, the IVEY PMI survey yesterday showed an unexpected decline for October, adding to signs of weakness in the Canadian economy and dragging the Loonie lower against the greenback.