Bank of England Shift Towards Rate Hike
7 August, 2015
Yesterday we had an unprecedented day for the Bank of England as they delivered their “new look” monetary policy meeting. As usual midday came and we saw the usual announcement showing the decision to raise rates or not, which they didn’t but it did show one member voted for a hike. This is the first time this year that has been the case but having gained so much the day before, the markets priced back out the chances of a rate rise sooner rather than later.
The minutes were released and digested by analysts in quick time ahead of the press conference at 12.45pm. The question came from the worlds press, as we are used to with the ECB and Federal Reserve, where Mark Carney mentioned interest rates will be going up but when that would be wouldn’t be known until nearer that time. Inflation and growth were all on target to meet forecasts and expected targets leaving the Bank open to tinker with interest rates. This left markets non-the-wiser but did help sterling make back some of the lost ground. Overall, sterling lost a cent and a half against the US dollar and the euro but more than likely this will be short term as markets have the knowledge that UK interest rates will be going up.
In addition to the interest rate decision, the UK also saw house price data released, which fell below expectations as did industrial and manufacturing production. In the afternoon, the US released jobless claims figures which, ahead of the non-farm payrolls figure today, came in lower than forecast, but with focus on the UK, had little effect.
So to today and as the dust settles, will we see the pound make back some of its losses as profit is taken and will the data releases have more of an impact?
There is plenty to go on, kicking off the day with German and French trade balance and industrial production figures. This is followed by the UK’s trade balance and Greek inflation. These all come in the morning ahead of the all important and eagerly awaited non-farm payrolls and unemployment data from the US which comes out at 1.30pm, along with Canadian employment data. These really are key releases and can move the markets significantly if the expected and actual figures vary, as they can do widely. If you have a transfer to make either to Canada or in US dollars to America or the Far East, get in touch this morning for some friendly guidance from the CI team.
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