Super Thursday Checks Volatility in the Sterling


GBP/USD is currently trading above the 1.4500 level (about 1.5460), GBP/EUR is trading at about 1.3105, with the GBP/EUR showing not too much movement over the course of yesterday, initially picked higher after a decent Services #PMI number out of the UK, but drifted lower over the course of the afternoon as a result of weak USD fundamentals, a big spike in EUR/USD, rises in oil prices and traders just looking at the markets and saying, “we don’t really know what’s going on, I’m going into the safety of the Euro,” strange as that sounds.

It’s “Super Thursday” with the Bank of England announcing its latest policy decision with the minutes of the meeting and the quarterly #inflation report at noon today (BST). At Capital Street Research Desk, we expect Ian McCafferty to maintain his calls for interest rate rises, as he has been doing so since Q3 of last year.

Obviously, despite a laundry list of complains around the UK economy at the moment, the fact that inflation is too low, that we’re not seeing wage pressures build, the European Union referendum is an equissentials risk for the UK economy as well, plus also global head wings to growth as we’re seeing in Europe, the United States and through Asia at the moment. It would be interesting to see how the Bank of England weighs in on them.

We’ve seen for example, from the #Reserve Bank of Australia, the Reserve Bank of New Zealand, and the Federal Reserve recently that they are fairly happy with the fundamentals at home – the domestic #economy is doing well. However, it is the issue around what winds may blow in from abroad and how that may affect their economy, that they’re most concerned about and therefore unwilling to move policy at the moment. As I’ve said, that all comes out at noon (BST).

Sterling’s had a little run higher, mainly against the US Dollar in the past 24- hours, with US #ISM net services number yesterday was pretty poor and the employment component fell to the lowest since April 2014. Why is that important? With #Non-Farm Payrolls tomorrow, a services sector that’s not really creating too many jobs, a manufacturing sector which is still struggling from a lack of investments and falling oil prices means that we’re not really sure where jobs growth in the United States is really coming from.

If we see a poor figure tomorrow, something below a 175k jobs added through the month of January, then dollar’s going to continue to remain weak through the course of the weekend.

Mario Draghi is speaking at the moment, strengthening the Euro a little bit as markets were hoping for maybe a little bit more volatile language around #ECB policy in March, but as I’ve said the main focus is that

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