Bank of England decision damages sterling
Last week saw some noticeable movement on the currency markets, with sterling falling by around 1.5%. This was a result of the BoE failing to follow through on its previous signals, instead leaving the Bank rate unchanged at 0.1%. Over in the US, the Fed showed the way in terms of good market signalling. A start to QE tapering was announced – which is consistent with the guidance it provided in September. The policy change passed without much incident for markets, including USD.
Data-wise, the main focus last week was the US payrolls number for October. After a few months of falling below expectations, this month’s release surprised in a positive manner beating expectations.
As we get underway this morning, the weaker tone to sterling after the BoE announcement is reflected in EUR/GBP sitting in the top quarter of the 85-86p band – last Monday’s open of 84.5p). Elsewhere, GBP/ USD is just below $1.35, EUR/USD remains within the narrow range we have seen of late around the midpoint of $1.15-1.16.
Looking ahead to this week, one of the main data highlights is UK GDP for Q3 (released Thursday). It is expected to confirm a slowdown in the recovery, with 1.5% growth being anticipated in (vs. +5.5% in Q2). For the US, the notable release this week is CPI for October which is released on Wednesday and forecast for 5.8% growth. There are also multiple speakers from the BoE, Fed, and ECB this week.