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Market Update: Unreliable boyfriend set to make good on promises

Today is a big day for Sterling, with the Bank of England's interest rate decision coming this lunch time. US jobless claims data is due, and anticipation is only heightening surrounding President Trump's choice for the new Fed chair. Read our currency breakdowns below for more.


GBP

PMI manufacturing nudged up above expectations, printing at 56.3 for October from a revised 56.0 previously. Confidence remains firm following robust orders growth, and the rate of growth in input and output prices hit seven-month highs. Sterling maintained a firm tone following the data with the Euro dipping below 1.1446 as the Pound tested resistance above 1.3300 against the Dollar. 

Despite firm market expectations of the first Bank of England (BoE) interest rate hike in 10 years, Sterling was subjected to a correction in US trading with a dip in oil prices having a mild adverse impact. With a rate hike today almost totally priced in, the Pound will dip sharply if the Monetary Policy Committee votes against a rate increase. Rhetoric from the statement and the inflation report will be crucial for medium-term expectations and the Pound’s reaction to any rate increase. Sterling held steady at market open with a slightly weaker Dollar trend being the main influence. Last-minute position taking means volatility may start in advance of the BoE announcement at 12pm.

USD

The latest US ADP report registered an increase in private-sector employment of 235,000 for October following a revised 110,000 gain the previous month. The figure beat forecasts and represented the sharpest gain for five months with a significant rebound from hurricane-related losses and particular strength in the construction sector.

The US ISM manufacturing index in October declined 2.1pp to 58.7 from 60.8 in September, mostly in line with expectations. Much of October’s decline was driven by an easing of inventories and supplier deliveries indices.

As expected, there was no change in interest rates by the Fed last night. Risks to the economic outlook were again described as roughly balanced and there were expectations of solid growth over the medium term while the labour market continued to strengthen. The FOMC was monitoring inflation closely, but expected the rate to reach the 2% target over the medium term.

The Dollar initially edged lower following the statement and, after a limited recovery, there was fresh selling in Asian trading on Thursday as the Euro retested the 1.1660 area with the single currency still resilient.

The Greenback is seen on a steady recovery mode after the early trading session, triggered by a sharp drop in the US futures on reports of a temporary corporate tax cut proposed in the tax reform bill due to be unveiled later today. Attention remains on President Trump’s announcement of the next Fed Chief (likely to be Jerome Powell) and Republicans should introduce the tax bill in Congress.

In the US docket, jobless claims data is due along with Challenger job cuts and speeches by Federal Open Market Committee (FOMC’s) members, Jerome Powell, Raphael Bostic, and William Dudley.

EUR

The Euro had a very quiet trading day yesterday with no significant data releases on the All Saints Day Bank Holiday. The single currency was, therefore, subject to speculation and data amongst its peers. Against the Dollar, the Euro also strengthened slightly to reach highs of 1.1655.

Today for the Euro we have German unemployment rate and change. With Germany being the second largest trade partner to the UK, firm data here will be positive for the Euro going forwards. That said, the Euro, similar to yesterday, will be subject to events across the water.

Data to watch:

08:55 EUR Unemployment Change (Oct) – Germany
08:55 EUR Unemployment Rate s.a. (Oct) – Germany
08:55 EUR Markit Manufacturing PMI (Oct) – Germany
09:00 EUR Markit Manufacturing PMI (Oct)
09:30 GBP PMI Construction (Oct)
12:00 GBP BoE Interest Rate Decision
12:00 GBP BoE Asset Purchase Facility
12:00 GBP Monetary Policy Summary Report
12:00 GBP Bank of England Quarterly Inflation Report
12:00 GBP BOE MPC Voting results
12:00 GBP Bank of England Minutes Report
12:30 GBP BOE’s Governor Mark Carney speech
12:30 USD Continuing Jobless Claims (Oct 20)
12:30 USD Initial Jobless Claims (Oct 27)
12:30 USD Nonfarm Productivity (Q3)
12:30 USD Unit Labor Costs (Q3)

— ROB AFFLECK AND THE SALES TEAM

EXCHANGE RATES //
GBP EUR 1.1387
GBP CAD 1.7025
GBP USD 1.3252
GBP NZD 1.9185
EUR USD 1.1637
GBP ZAR 18.5288
GBP AUD 1.7202
GBP JPY 151.247
* Please note that the table shows the interbank rates. If you would like to get a more accurate quote, call us on 02077380777. For more information visit our help pages.
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