As expected the The Bank of England made no changes to interest rates or asset purchasing yesterday. Also as expected the Bank upgraded the economic outlook for the UK economy anticipating a slightly stronger outlook for consumption growth in Q2. The Bank’s governor Andrew Bailey was keen to reiterate the central bank was in no hurry to reduce it’s support measures aimed at helping the economy recover from the pandemic. Interest rates remain at 0.1% and no changes in the asset purchase programme which stands at £895bn.
This morning’s UK consumer confidence data printed the highest level since the pandemic began as figures for March increased to -16. The Pound opens at 1.3943 to the Dollar and is threatening to break above 1.1700 against the Euro.
US jobless claims increased to 770,000 in the latest week from a revised 725,000 the previous week and well above consensus forecasts of 700,000. Continuing claims declined marginally to 4.12mn from 4.14mn previously, but slightly above market expectations. There was a sharp decline in pandemic assistance claims of 1.9mn on the week which helped underpin confidence in the labour-market outlook.
The Philadelphia Federal Reserve (Fed) manufacturing index strengthened sharply to 51.8 for March from 23.1 the previous month. This was well above consensus forecasts of 22.5 for the month and the strongest figure for over 50 years as close to 60% of companies reported stronger activity. There was also a surge in the new orders component with a solid increase in unfilled orders. Employment increased at a faster pace on the month and price increases also accelerated with the prices paid index strengthening to the highest level since March 1980. Companies were also notably more optimistic over the six-month outlook.
The data bolstered expectations of stronger growth and inflation pressure within the economy which also provided net support to the US dollar.
The Euro continues to lack any firm directional bias against the Dollar and remained confined in a narrow trading range, just above the 1.1900 mark.
Despite Wednesday's dovish FOMC statement, investors seem convinced that the continuous improvement in economic conditions will force the US central bank to raise interest rates sooner rather than later. The single currency also found some support after European nations announced plans to resume using AstraZeneca’s COVID-19 vaccine on Thursday.
As of writing, the Euro currently trades around the 1.1930 level against its US counterpart.
Posted in Daily Market News on Mar 19 2021