Apex Banks Place their Faith on the Unknown
GBP/USD is currently trading at about 1.4300 the figure, GBP/EUR is trading at about 1.2840, with the #Sterling higher than it was this time on Wednesday across the board following a decent wage picture as part of the unemployment report that we had on Wednesday.
Unemployment stayed at 5.1% for weekly earrings, excluding bonuses it rose to 2% compared to 1.8% expectation and the knowledge that we saw 205k people get jobs over the course of the past 3-months, leads us to believe and confirms our believe that the slack that we’re seeing in #labor markets is continuing to be taken up in a very quick rate, and therefore wage pressures are likely to build throughout the rest of this year.
We therefore stand to reason that expectations that we won’t see an interest rate hike for the next 2 ½ years and maybe a cup before then are slightly out of kill to what the economic data is saying at the moment. As we’ve noted at #CSFX Research Desk the Sterling is rebounding higher as a result of that on Wednesday.
The key for #central bankers at the moment, is faith around inflation. They do not have faith in inflation starting to build looking just around the corner. The interest rate rises that take 12-18 months to impact the real economy, need to be made with the faith that inflation will start to build in the near term future.
In the United States for instance, the #Federal Reserve minutes last night suggested that policy makers are without faith at the moment and therefore we’re going to see the dot chart that predicted maybe four interest rate rises from the Federal Reserve over the course of 2016 at their March meeting, maybe reduced to something around two, alongside lower #inflation and growth expectations. We’ll wait and see on that. To be honest, most of this has been telegraphed by #Janet Yellen’s Humphrey Hawking’s last week.
Elsewhere, the Aussie dollar is a little bit lower this morning, just as we reported in our update earlier on, following a poor unemployment report that saw unemployment rate rise to 6%. The Mexican #Peso is vastly stronger over the past 24-hours following intervention by the central bank, buying up the currency in a bid to ward off speculators as well as a 50 bps increase – that was an unexpected move. It would be interesting to see if emerging market currencies that have been taken on by speculators in the past 12-months would fight back sooner rather than later.
It is all about the UK-EU referendum today. The UK-EU summit in #Brussels begins this morning, with #David Cameron having a lot of work on his hands, to make sure that the plan that he submits to the UK populist over the course of the weekend after a cabinet meeting tomorrow is strong enough.
There are opinion polls all over the place at the moment, and the Sterling is all over the place as a result of that as well. Other figure to watch out for is the U.S. inflation at 13:30 BST this afternoon. Is their faith starting to build? We would find out!