UK interest rate held
The sole data release yesterday, UK construction PMI, showed the industry contracted in April at the fastest rate for over 20 years. The data printed a woeful 8.2 against forecasts of 21.7 and a March’s figure of 39.3. The Pound fell against a stronger Dollar to hit a low of 1.2333, the lowest in 2 weeks. The Pound also drifted lower against the Euro throughout the day, surrendering 50 pips to reach 1.1430. After the US market opened Sterling attention was drawn by today’s BoE monetary policy announcement.
Super Thursday has had a timetable shake up with the Bank of England announcing, at 7am, the unanimous voting to hold the benchmark interest rate at 0.1% and leave its target for bond-buying unchanged at 645 billion in a 7-2 vote split. The Pound has bounced back across the board on the news but we’ll have to wait for the 10am press conference with Governor Bailey for more detail.
Ahead of the Friday UK Bank Holiday, the UK Cabinet is expected to formally announce an extension of the U.K. lockdown and speculation mounts on easing the strictest measures beginning next week.
US Secretary of State, Mike Pompeo, repeated claims there’s evidence that Covid-19 escaped from a laboratory in Wuhan, contradicting the opinion of Dr Fauci, the top infectious disease expert in the US. China have responded by claiming it’s merely a tactic to place the blame on China before the election in November. As Trump has also threatened trade tariffs on China to punish them earlier this week, this could make investors even more jumpy; usually safe haven currencies (like the US Dollar) strengthen. The US Dollar has gained around 1.5% on the Euro and 0.5% against the Pound this week. Whilst we will be sunbathing tomorrow whilst socially distancing the US non-farm payrolls will be released. The forecast is for the worst ever at -21.4m, that’s 21.4m non-seasonal jobs lost.
The Euro has been under pressure, struggling just below the 1.08 level amid concerns the European Central Bank will be unable to support struggling countries.
Vice President Luis De Guindos has stated while presenting the 2019 ECB’s annual report that Europe and the world are facing an economic contraction of extraordinary magnitude and speed, inflation was likely to fall much further in the coming months, a continued stand to make further adjustments to monetary policy measures was their whilst the the ECB’s response will be made more powerful if all policies reinforce each other.
As of writing the Euro trades at 1.0795 against the Dollar.
Data to watch
07:00 – GBP – BOE Monetary Policy Report
07:00 – GBP – MPC Official Bank Rate Votes
07:00 – GBP – Monetary Policy Summary
07:00 – GBP – Official Bank Rate
10:00 – GBP – BOE Gov Bailey Speaks
1:30 – USD – Unemployment Claims
3:00 – EUR – ECB President Lagarde Speaks