BOE on hold but hawkishness slips
The 9 member Monetary Policy Committee of the Bank of England voted six to three in favour of keeping the UK base rate on hold at 5.25% when they met yesterday. At their previous meeting, 4 of the members voted for an interest rate hike, whereas only three did the same in this meeting. No matter what the rhetoric within the statement and the meeting minutes, this is a fairly clear signal that UK interest rates are starting to reach a plateau. We may not be there quite yet and that was pointed out by the governor of the BOE but it is very clear to the markets I believe this is the case. The GBP/USD rate spiked above USD 1.22 briefly but is just below that level right now. The GBP/EUR rate is still bouncing between €1.1450 and €1.1520. We have a couple of speeches from Bank of England members today but no significant UK data. However, eurozone, Canadian and US employment data will keep things lively, so sterling will be washed around in the wake of those data releases.
US Non-farm payrolls in the spotlight after weekly claims rise
In data released yesterday, it was shown that 217,000 fresh jobless claims were filed in the last week. That was above expectations and casts a slightly different spotlight on this afternoon’s US employment report, where we are likely to see substantially fewer jobs created in the non-agricultural sectors than the previous month’s 336,000. At a time when the markets are watching the US Federal Reserve very closely for hints of a softening stance on the US money supply and interest rates, soft data like this could well weaken the US dollar for the weekend. Right now, the GBP/USD rate is sitting just below $1.22 and the EUR/USD rate is half a cent below yesterday’s highs at $1.0622. The nervousness in the market is epitomised by the price of gold. This bellwether of investor sentiment is a tad down from last week’s highs but still very close to the psychological threshold of $2000 an ounce.
Poor Canadian employment data forecast
Against the pound, the Canadian dollar has gained a full cent in the last 24 hours. That is surprising at a time when the markets are forecasting fairly negative employment data from Canada. That data will be released around 12:30 GMT and the markets are expecting a slight rise in the unemployment rate to 5.6%, up from 5.5% in September on the back of just 22,000 fresh jobs being created in October. Nearly 64,000 jobs were created in September. If the actual data is in line with these forecasts, the strength we have seen in the Canadian dollar in the last day is likely to be unwound fairly quickly because such negative data will give the Bank of Canada pause for thought before they consider any further interest rate hikes. It may even tip them over the edge into considering a cut at their next meeting on December 6th. For now, sellers of Canadian dollars have an opportunity to do so at the best levels we’ve seen for a fortnight. Currently, the GBP/CAD rate is trading around CAD 1.6750 in the interbank market.