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November 2017

Bank of England dovish forecast sees Pound slump

Published: Friday 03 November 2017

  • Bank of England dovish forecast sees Pound slump
  • Aussie retail sales show no growth
  • US awash with data later
By David Johnson
Bank of England raises interest rates and Pound takes a tumble
Cor blimey guvna, they’ve only gorn ‘n went ‘n dun it, ain’t they! The Bank of England (BoE) has made its first interest rate hike since June 2007. In fact, I think I am right in saying none of the current committee members have ever raised the base rate. The markets were so ready for that 0.25% rise to happen that the Pound registered barely a half a cent rise against the Euro in the few seconds following the announcement, but, when traders saw the line on the statement that pointed to just two more hikes in the next three years, Sterling dived. The Pound began Thursday at a perky €1.14 and a breezy US$1.33 but, by the time everyone had read the highly dovish statement in full, those numbers were €1.11 and $1.30. There has been marginal recovery overnight. This morning’s Service Sector Purchasing Managers’ Index (PMI) might give the Pound another boost, but that is not a definite. Another long drawn out recovery in the Pound seems likely.
US markets face a barrage of data today – USD could fall
The markets in America barely twitched when the President announced the name of the new Federal Reserve Chairman as Jerome (call me Jay) Powell. His similarity to Janet Yellen in terms of his stance and views makes him a fairly trouble-free gender change.  Having had an underwhelming Thursday, the US markets will be overwhelmed by the barrage of data that will assault them this afternoon. Employment, earnings, manufacturing sentiment, factory orders and durable goods figures will assail us between 12.30 and 14.00 GMT. Brace yourselves. If all the forecasts are right, we should end the day with a slightly weaker USD, but Wall Street traders are still very excited about stellar results from Apple, so they may waltz into the weekend with smiles on their faces anyway.
Canada awaits employment data and could pick up further
Canada’s employment data is expected to show a small slowdown in employment growth but positive data nonetheless. The Canadian Dollar, which rode the declining Pound from around C$1.71 to C$1.67 yesterday, has found GBP buyers at that level, but it may make further gains if this data is any more positive than the forecasters would have us believe.
Australian Dollar weakens overnight
The Sterling – Australian Dollar rate fell in line with everything else yesterday, but the AUD weakened overnight after Australian retail sales data showed no growth at all in September. This was in contrast with forecasts that suggested a rebound in high street activity would occur in the month. There is very little chance of a rate change from the Reserve Bank of Australia when they meet on the 7th November, but the rhetoric in their statement may be the highlight of next week for this pair.
Remember, remember, the 5th of November
And it is ‘lock up your pets’ weekend ahead. Houses across the country will have stereos and TVs turned up loud and pets kept in to avoid the bangs and flashes of fireworks night. I hope your furred or feathered friends are not too scared by the excitement and, while we are on the subject of Guy Fawkes, can anyone tell me why we have fireworks to celebrate parliament NOT being blown up?  I’ve never understood that!

After having their 11th child, a rather simple couple decided that was enough. The husband went to his doctor and asked for some advice.

The doctor told him there was a procedure called a vasectomy that would fix the problem but it was expensive and there was a two-year waiting list. “There is a less costly alternative,” he said. “Go home, get a firework; a roman candle or a large banger, light it, put it in a beer can, then hold the can up to your ear and count to 10.”

The husband said to the doctor, “I may not be the smartest bloke in the world, but I don’t see how putting a firework in a beer can next to my ear is going to help me.”

“I am a Doctor,” said the doc. “You came for my advice. Now trust me to deliver a solution that will work.”

So the man went home, lit the largest banger the firework shop had on display and put it in a beer can.  He held the can up to his ear and began to count, ‘1, 2, 3, 4, 5,’ at which point he cursed and hurriedly placed the beer can between his thighs so he could continue counting on his other hand.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Services Purchasing Managers' Index 53.6 53.3
CAD 12:30 Canada: Employment Change 10.0k 15.3k
CAD 12:30 Canada: Trade Balance -3.4b -3.0b
CAD 12:30 Canada: Unemployment Rate 6.2% 6.2%
USD 12:30 US: Average Hourly Earnings 0.5% 0.2%
USD 12:30 US: Non-Farm Employment Change -33k 312k
USD 12:30 US: Unemployment Rate 4.2% 4.2%
USD 12:30 US: Trade Balance -42.4b -43.3b
USD 13:45 US: Final Services Purchasing Managers' Index 55.9 55.7
USD 14:00 US: ISM Non-Manufacturing Purchasing Managers' Index 59.8 58.5

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