November Rate Hike Still in Focus for the BoE

BoE

GBP/USD is currently trading at about 1.4530, GBP/EUR is below that 1.3000 level (about 1.2980), with the Sterling lower against both the US Dollar and the #Euro since this time yesterday. It is definitely Christmas in February for us economist (Super Thursday yesterday and Job’s Friday today).

The impact on the #Pound from Super Thursday was initially negative after Ian McCafferty, who had been the only member of the #MPC to be voting for an interest rate hike is now rejoining the #consensus, and it is now a unanimous vote to hold rates at 0.50%.

It did bounce back a little bit in Sterling crosses following the #quarterly #inflation report press conference where Mark Carney did push back on the belief that there’s a 30% chance of an interest rate cut by the Bank of England by the end of the year.

That being said, interest rate expectations have been pushed out very far, with some analysts saying it has stretched as far as March 2018. So therefore, any short term Sterling strength is probably not coming from the belief that we’re likely to see interest rates higher sometime this year.

The #MPC members did comment on the referendum, they say it could be the reason for the weakness that we have been seeing in the Sterling of late. Market Opinion suggests that movement in option prices and option volatility are showing further downside as expected for the #Pound, as we head into the referendum whenever that may be.

Its job Friday today as we’ve noted and we’re looking for a slightly worst figure than the market consensus of 190k. We’re looking for a 175k jobs to have been added in the United States in the month of January. We saw a poor figure from the services #ISM (this is the read out of how well the services sector is doing in the United States) and their employment component was the weakest since April 2014.

If the services sector isn’t creating jobs, manufacturing sector certainly isn’t, so where are the jobs coming from?

The U.S. Dollar is mid-way or coming to the end even of its worst week since 2008 and therefore if we see another poor figure, you’ll have to expect that dollar selloff to continue dragging GBP/USD and EUR/USD higher over the course of the day.

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