BOE and ECB keep rates unchanged
It was a busy day on the markets yesterday as we saw the monthly interest dates from the Eurozone and UK as well as various figures out of the US.
In the UK, Mark Carney and the rest of the Bank of England team decided to keep the key benchmark rate at 0.5%. Unlike last month, the BoE chose not to issue any statements, leaving the understanding that the BoE asset purchase target of £375bn remains unchanged. This was welcomed by the markets and GBP had an initial bounce against the USD and also continued its recent good run against the Euro, heading at its peak to the 1.1875 mark.
Mario Draghi and the European Central Bank also announced their interest rate decision yesterday and kept this on hold at 0.50%. However, due to comments made in the press conference following the announcement, when Draghi said the ECB “keeps the rate cut option”, the Euro came under increased pressure. Allied with poor German factory orders, rising French unemployment figures, recurring fears over the fragile Italian coalition and the recurring crises in Greece and Cyprus which never seem to really go away, the Euro came under increasing pressure with the Pound and US Dollar both amongst the beneficiaries.
In the US, Non-Farm Payrolls which are seen as being the most important US economic data, will take centre stage today. The figures are expected to show growth from August’s figure and should result in further strength in the Dollar as it moves them closer to their tapering programme which is expected to start in mid-September. The markets are expecting a rise to 180,000 from 162,000 in July. USD strengthened yesterday as factory orders declined less than expected in July and there was also a large increase in the August manufacturing non-PMI.
In other news, world leaders are in St Petersburg for the G20 summit, where events in Syria are expected to remain top of the agenda. Also, tomorrow sees elections in Australia. The markets are expecting a landslide for the Liberal/National coalition which should strengthen the Australian Dollar initially, although long-term doubts remain.
Have a good weekend!