A big day for the Bank of England

 Mark Carney is very keen on improving forward guidance to the markets and will today provide a wealth of information for the markets to absorb in a very short period of time. Industrial & Manufacturing production is already set to be announced at 9:30am but the big releases will await until midday when the BofE will confirm Augusts’ interest rate decision, along with the minutes on how the MPC members have voted, as well as a detailed quarterly inflation report. All of this will be followed 45 minutes later by a press conference from the Mark Carney and so high levels of volatility are to be expected during the afternoon trading.

Markets are expected the inflation report to indicate that a recovery to the 2% target is still on track, but with some risks of exceeding target in 2017. It is this factor that is likely to see 1, 2 or even 3 members of the MPC voting for a rate hike this month as part of a minority vote. As far as the pound is concerned, the more votes we see the greater chance there is of sterling strengthening, and vice versa. As much of this is already expected we have already seen some pricing in yesterday with the pound performing well across the board despite weaker PMI data in the morning. Services PMI for the UK missed expectations of 58, falling shy at 57.4. Traders however took advantage of any dips to push the pound higher ahead of today’s announcements.

Elsewhere Euro-zone Retail Sales were also poor, dropping to 1.2% annual growth from 2.6% last month, although the Euro remained relatively unchanged by this data. There were some big swings in the afternoon however once the US data had been released. ADP employment change posted a result of 185k against expectation of 215k, raising concern that Friday’s Non-Farm Payrolls may be weaker than expected. The USD was however boosted shortly after as Manufacturing PMI came in significantly better, up to 60.3 from 56 last month.