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April 2016

BoE rate decision the main focus today

Published: Thursday 14 April 2016

  •  BoE rate decision the main focus today
  • Australian unemployment rate drops to 5.7%
  • Beige book upbeat
  
The Dollar is playing catch up after a slow start to the week as it pared back its earlier losses. Weak US retail sales numbers which contracted by 0.3% paved the way for a weak first quarter GDP report. The improvements reported by the Fed's Beige Book last night were not consistent with the most recent economic reports. The Fed Beige book also revealed that the US economic activity expanded from late February to early April and low unemployment appears to be spurring an uptick in wage growth. The strength in the USD may suggest that the softness of the US economy has already been priced in and the Dollar downtrend is over.
 
The BOC left rates unchanged as expected and while they expressed some concern about the strength of the CAD and its impact on the non-resource sector, they raised near-term growth forecasts with 2016 GDP growth raised to 1.7% from 1.4%. This move reflects their positive outlook for the domestic economy and their belief that the output gap will be sooner than anticipated. However, BOC Governor Poloz said that the Governing Council would have a bias opinion toward further easing if it were not for the government's fiscal stimulus program announced in March.
 
The Australian unemployment rate fell to the lowest level in two and half years down to 5.7% in March. Offering further evidence that record low interest rates are aiding a recovery and signals to the market that the central bank is unlikely to ease policy in the near-term.
 
The Bank of England’s rate decision will be the main focus today and they’re expected to keep rates at 0.50% and the asset purchase target at GBP 375bn. Despite the ongoing uncertainty that surrounds the referendum in June, we've seen widespread improvements in the U.K. economy showing upticks in manufacturing and services, higher wage growth, lower jobless claims and rising consumer prices however spending remains weak which is an area that the Bank of England warned would be affected in the lead up to the referendum.
 

Today's Major Economic Releases

 
Market BST Data/Event Previous Expected
EUR 09:00 E19: Final HICP, % m/m (y/y) 1.2 1.2
GBP 11:00 UK: BoE Bank rate decision 0.50 0.50
GBP 11:00 UK: BoE asset purchase decision, bn 375 375
USD 12:30 US: Initial jobless claims, k (4wma) 267 270
USD 12:30 US: CPI, % m/m (y/y) -0.2 0.2
USD 12:30 US: Core CPI, % m/m (y/y) 0.3 0.2

Daily Currency Insight by Denzil Rickerby

Daily Currency Analysis with Michael Hart

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