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No surprises from the Central Banks

No surprises from the Central Banks

GBP
UK Monetary Policy was left unchanged after a unanimous vote at yesterday’s Bank of England (BoE) meeting. The central bank believes that its economic forecasts are “broadly on track”, and raised growth forecasts. Despite an increase in concerns about protectionism, EM risks and Brexit uncertainty since the August meeting, Brexit uncertainty and EM risks appeared to be broadly offset by stronger economic growth and a more sizable than expected pick-up in wage growth at home. The statement noted some negative spillover into the economy via trade and investment from Brexit.

 

Sterling climbed 0.5% against the Dollar, hitting 1.3115 shortly after the BoE release. As the Euro was still awaiting the ECB policy, the effect was muted at best, and closed much where it started at 1.1215 against the Pound.

 

The UK’s Brexit Secretary Raab noted that he is confident that the UK will get a good Brexit deal, contributing to renewed optimism. Today the UK has no data releases but BoE Governor Mark Carney’s speech at 10 A.M. will draw scrutiny for fresh hints on the BoE’s rate hike outlook.

 

USD

 

The US Dollar continued to trade on the back foot across its main competitors, as the US CPI miss weighed pretty heavily on the Buck. The CPI data rose 0.2% in August, while the annual rate eased from 2.9% to 2.7%.

 

Today we see Retail sales scheduled for release at 1:30 P.M. and is expected to rise 0.4% month-on-month in August, following a 0.5% rise in July. An above-forecast reading would reinforce expectations that domestic demand would cushion the US economy from external shocks, and could put move the Greenback higher. On the other hand, a weak figure could force the investors to scale back the expectations of faster Federal Reserve (Fed) rate hikes.

 

Today sees a fresh batch of US macro news, which will offer fresh impetus to the traders in the NA session. Of course, retails sales, as well as the US industrial figures and prelim UoM consumer sentiment data, will keep the market busy. Fed member Evans’ speech and the Bank of Canada (BOC) review are due on the cards in the American docket, ahead of the Baker Hughes US oil rigs count data.

 

EUR

 

Positive news from the European Central Bank (ECB) confirmed it was going to ease up on its bond purchasing programme, kept its inflation forecasts, but lowered growth projections. Turkey’s central bank hiked interest rates to 24%, against President Erdogan’s will, which provided some stability. Against the weak Dollar, the Euro pushed up above the 1.1700 mark and has held there.

 

The ECB is expected to keep downgrading forecasts for economic growth, which is fuelling strong support for the Pound against the Euro, and yesterday the interbank rate hit 1.1234. Yesterday was a big day for data, but there were no surprises as everything came out on consensus, and Draghi’s speech confirmed what most people were expecting him to say.

 

Data today for the Euro is minimal, with CPI figures out of Italy and Trade Balance numbers from the EU being the only releases due. Little volatility is expected from the data, with more significant releases coming from the UK and the US set to overshadow Europe.

 

Data to watch:

10:00 GBP BOE’s Governor Carney speech

10:00 EUR Labour cost (Q2)

12:30 USD Retail Sales ex Autos (MoM) (Aug)

12:30 USD Retail Sales control group (Aug)

12:30 USD Retail Sales (MoM) (Aug)

13:15 USD Industrial Production (MoM) (Aug)

14:00 USD Michigan Consumer Sentiment Index (Sep)

17:00 USD Baker Hughes US Oil Rig Count

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