- Bank of England expected to hold rates steady
- Growth in UK’s construction industry
- Federal Reserve leaves rates unchanged
Yesterday, UK Construction Purchasing Managers’ Index (PMI) beat expectations by printing at 52.6 against a forecast of 51.9. As a result, the Pound strengthened, gaining by 0.3% against EUR and 0.7% against USD. As with Tuesday’s Manufacturing data, the construction survey revealed that input prices were rising sharply. Markets are confident that the latest figures showing economic strength indicates that inflation is set to overshoot the 2% target level and that may have convinced the Bank of England (BOE) not to loosen stimulus measures today. Leading think-tank National Institute for Economic and Social Research (NIESR) goes as far to say inflation is set to soar pass 4% in the second half of next year and cut disposable income.
In the afternoon we had ADP employment data which was worse than forecasts at 147k. Markets often look to the ADP figure as a precursor to Non-Farm payrolls which are due on Friday, a weaker number could see the Dollar continue to lose ground. The Federal Reserve (FED), last night kept rates on hold at 0.5% ahead of the US Presidential Election but kept the door open for a rise in December. Markets were little changed following the announcement with most analysts factoring in a December move. This has been backed up by a stronger economy, good job creation and confidence that inflation is going to reach the 2% target.
Today, we have UK Services PMI later this morning, expecting 52.5. This figure is usually closely watched however attention will quickly turn to the Royal Courts of Justice as Judges are due to give their ruling on whether the Government must receive Parliament's consent before triggering Article 50 to begin the UK’s exit from the EU. Campaigners argue that Theresa May cannot invoke Article 50 without the backing of the House of Commons. If MPs get a say, analysts believe there is more chance of a ‘soft Brexit’ where the UK retains access to the single market and we could see the Pound strengthen on the back of this. As mentioned, we have the BOE inflation report today followed by UK rate decision with the expectations of no changes here and then Governor Carney’s supporting speech. The day finishes with US Employment Claims and US Institute for Supply Management (ISM) Non-Manufacturing figures at 14:00 GMT.
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Today's Major Economic Releases
| Market |
BST |
Data/Event |
Previous |
Expected |
| GBP |
09:30 |
UK: Services Purchasing Managers' Index |
52.6 |
52.6 |
| EUR |
10:00 |
EU: Unemployment Rate |
10.1% |
10.0% |
| GBP |
10:00 |
EU Membership Court Ruling |
|
|
| GBP |
12:00 |
Bank of England (BoE) Inflation Report |
|
|
| GBP |
12:00 |
Bank of England (BoE) Official Bank Rate Votes |
0-0-9 |
0-0-9 |
| GBP |
12:00 |
Bank of England (BoE) Monetary Policy Summary |
|
|
| GBP |
12:00 |
Bank of England (BoE) Official Bank Rate |
0.25% |
0.25% |
| GBP |
12:00 |
UK: Asset Purchase Facility |
435b |
435b |
| GBP |
12:30 |
BoE Governor Carney speaks |
|
|
| USD |
12:30 |
US: Unemployment Claims |
258k |
257k |
| USD |
14:00 |
US: Non-Manufacturing Purchasing Managers' Index (PMI) |
57.1 |
56.2 |
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Daily Currency Analysis by Joe De Berniere
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