Its all about Jobs
This morning’s data releases have already showed that UK jobless claims fell by 34.6K , whilst this is positive it was not enough to alter the overall employment rate at 7.2%. While the BoE has dropped its explicit guidance and threshold on the unemployment rate, it remains the crucial variable for the UK’s policy outlook. The BoE minutes, also released today, showed unanimity in keeping policy unchanged. This has given GBP a lift versus EUR but a negligible impact versus USD.
The market will now be squarely focused on this evening’s FOMC policy meeting in the US (at 6pm GMT). This will be Governor Yellen’s first policy meeting. Whilst further tapering is virtually a given, the market will be looking for any changes in the forward guidance policy and indeed the individual governors forecasts of future fed rates. Some market participants expect a return to ‘old school’ central banking where there is no forward guidance and the markets are left to react to the monthly statements of the central bank.
The Bank of England governor, Mark Carney, yesterday outlined significant changes for the Bank of England’s focus – key to this was a broadening of vision away from just the inflation rate. Whilst there was little market reaction, this statement will change the way the markets analyse forthcoming economic data.