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February 2017

Bank of England raises 2017 economic growth

Published: Friday 03 February 2017

  • Bank of England raises 2017 economic growth
  • EU and UK Services figures later today 
Marked as ‘Super Thursday’, the Bank of England raised its 2017 growth forecast sharply.  It expects the economy to grow 2% in 2017, up from a November forecast of 1.4%, which itself was an upgrade from the 0.8% forecast made in August.  The bank also makes a remarkable outlook about the savings rate, which it expects to fall to 4%, the lowest rate since the early 1960s. The Bank also, as was widely expected, kept interest rates on hold at 0.25%. The raised growth forecast follows much criticism aimed at the Bank for being too pessimistic when it drastically cut its growth forecast after June’s referendum. 

According to the Bank’s Quarterly Inflation Report, domestic demand had been stronger than expected in the past few months and there have been few signs of a slowdown in consumer spending that the committee had initially anticipated following the referendum.  The bank also said the latest improved forecast was partly the result of higher spending and investment, rising stock markets and the greater availability of credit for households.  The Bank expects the weakness in the pound to propel inflation higher and it expects inflation to reach 2.7% next year, way above its 2% target. 

Sterling fell sharply as a result, dropping 1.2% versus the US Dollar to below 1.2530 and down to 1.16 versus the Euro.  This is largely as the markets are interpreting the report as indicating that the Bank is in no rush to raise rates.  The markets are currently forecasting a 50% chance of a rate hike this year and almost certainly, odds on one for 2018. Yesterday’s Construction Purchasing Managers’ Index (PMI) results didn’t help the Pound, coming in worse than forecast at 52.2.

Today we have a string of EU and UK Services PMI figures, so we could see some volatility here, especially if we beat forecasts of 55.8.  In the afternoon, we have US Non-Farm Employment figures and the US Unemployment rate, expected 170k and 4.7% respectively.  Then US Institute of Supply Management (ISM) non-manufacturing at 15:00 GMT.  There should be ample volatility, so please do contact your Halo Financial Currency Consultant to discuss opportunities.
 

Quotes


Time heals almost everything. Give the Time, some Time.

What others think of you is none of your business.

“Be Strong,” I whispered to my WIFI signal. 
 

Today's Major Economic Releases
 

Market
BST
Data/Event
Previous
Expected
GBP 09:30 UK: Services Purchasing Managers' Index
56.2
55.8
EUR 10:00 EU: Retail Sales month-on-month -0.4% 0.3%
USD 13:30 US: Average Hourly Earnings month-on-month 0.4% 0.3%
USD 13:30 US: Non-Farm Employment Change 156k 170k
USD 13:30 US: Unemployment Rate 4.7% 4.7%
USD 14:45 US: Final Services Purchasing Managers' Index 55.1 55.1
USD 15:00 US: ISM Non-Manufacturing Purchasing Managers' Index 57.2 57.0
USD 15:00 US: Factory Orders month-on-month -2.4% 1.5%
 
Daily Currency Analysis by Joe De Berniere