Sterling Up As BoE Boosts Economy

GBP

Sterling has risen against the Euro and Dollar this morning following the Bank of England decision to boost support for the lockdown ravaged UK economy. Upside momentum however, will likely be limited by news EU and UK negotiators have confirmed significant differences remained between the two sides. The BoE announced it would boost quantitative easing by £150 billion, an amount significantly greater than the £100 billion markets expected which including an expansion of its asset buying programme takes the total to £895 billion as Interest rates were kept unchanged at 0.10%.

The price action in the UK currency has hinted that the markets primary focus is still on a post-Brexit trade agreement, the US elections and the Covid-19 crisis. These issues will ultimately determine whether the BoE boosts quantitative easing further or or even cuts interest rates to 0% or below.

Media reports suggest the negotiating teams for both the UK and EU will now take stock before reconvening in London on Sunday. Talks are likely to continue for a further two weeks, with a summit of EU leaders on November 19 being widely expected to be the key moment where a Brexit breakthrough is achieved. Markets in the short term will likely remain focussed on the outcome of the U.S. election where both candidates await the final results from a number of key states.

 

USD

ADP’s private sector jobs report missed estimates with 365,000 positions gained in October. The ISM Services Purchasing Managers’ Index beat expectations with 57.4 points, yet the employment component dropped. These two figures serve as clues toward Friday’s Non-Farm Payrolls as weekly jobless claims are on the docket for today, with another small drop expected. 

The Federal Reserve is forecast to leave its policies unchanged in a decision due out later today. The Fed previously pledged to keep interest rates low at least through 2022 as Chair Jerome Powell is expected to address the media with his tone about the economy being closely watched. 

Joe Biden is also nearing the presidency as counting continues in several critical states and markets seem content that the results are only delayed. Hopes of stimulus are weaker as Republicans are on track to hold the House.

 

EUR

The Euro is benefiting from a flurry of risk-on action in Asian equities and thus pushing the single currency higher to around the 1.1740 neighborhood against the Dollar. 

The pair is currently trading slightly higher albeit still trapped within Wednesday’s range of 1.1770 to 1.1600. The immediate bias will remain neutral as long as that range remains intact and neither level is breached.  If the risk-on action gathers pace, the Euro could end up challenging Wednesday’s high. 

On the docket, the focus will be on the German Factory Orders scheduled for release this morning.

 

Data to watch

08:00 – GBP – Asset Purchase Family 

08:00 – GBP – BOE Monetary Policy report 

08:00 – GBP – MPC Asset Purchase Facility Votes 

08:00 – GBP – Monetary Policy Summary

08:00 – GBP – MPC Official Bank Rate Votes 

08:00 – GBP – Official Bank Rate 

08:00 – GBP – BOE Gov Bailey Speaks 

08:00 – EUR – EU Economic Forecasts

14:30 – USD – Unemployment Claims 

20:00 – USD – FOMC Statement 

20:00 – USD – Federal Funds Rate

20:30 – USD – FOMC Press Conference