It’s Super Thursday and GBPEUR is comfortably above 1.4000…
Data reporting on the UK economy maintained this week’s positive tone yesterday as Markit Services data exceeded market consensus for October and improved on the previous published data. As for Sterling though, we witnessed somewhat of a mixed day versus its two most traded counterparts. The Pound pushed the Dollar to retest a key level of resistance and failed to breach it, retracing its steps and running out of steam. Versus the Euro, the Pound kicked on and entered new territory, holding overnight and poised ahead of the all important Bank of England (BOE) releases today.
The rumours circling are predominantly based on a more hawkish tone from Mr Carney. Last time out, the vote from the 9 members was split 7-2 in favour of keeping things on hold. However, this time around, many think it could be 6-3. In short, price action can be expected today and Sterling is perfectly positioned to see further gains versus the majority of currencies.
Fed Chair Yellen gave testimony to congress yesterday, reiterating that a rate hike in December is a “live possibility”, depending on data, but the US economy is performing well. Her remarks pushed bond yields higher and stocks lower. They also caused investors to reset their expectations of a December rate hike above 60%. Whilst this had little effect on the Dollar initially, it is likely to give tomorrow’s Non-farm payrolls data even greater influence given that the US is not that far from its 2% inflation target. The Dollar index, which tracks the Greenback against six major peers, was down about 0.1 percent at 97.874, after it rose to a three-month peak of 98.054 on Wednesday as energy stocks turned lower on a drop in oil prices.
Eurozone woes continue to be a hot topic for market participants as the single currency looks depressed and is losing its battle to counter the strength of both the Pound and the Dollar. The macroeconomic data released yesterday didn’t exactly paint a negative picture as the results showed us that the bloc’s Services industry maintained healthy expansion, with the final reading ticking up to 54.1 in October, up from 53.7 in September. The report also suggests that this move proved to be even more positive as it came almost as a direct result of improved levels of new business and increased employment – two of the key factors behind introducing quantitative easing in the first place.
European Central Bank President Mario Draghi sat at the head of a press conference in Frankfurt yesterday to review the content of the first year since introducing the single supervisory mechanism. He urged policymakers to complete the integration of the European banking sector with Europe-wide mechanisms for insuring customer deposits and winding up failed banks; he went on record to say that these reforms are a prerequisite for financial stability. It would seem that Draghi is taking a hardline stance against underperforming banks, if this stance is maintained and accomplished, it will definitely help in shoring up the failing financial system across the bloc.