Will Carney unleash the bulls?
The GBPUSD pair clocked a high of 1.3409 after the Bank of England’s (BoE) Haldane said a rate hike would be good news. However, gains were short-lived and the currency pair drifted lower to 1.3388 levels.
As per a BBC report, Theresa May is set to restate her determination to be tough on public spending despite political pressure to ease up on austerity. Continuing to deal with our debts is the way to strengthen the economy, the Prime Minister will insist today. The pro-austerity stance of the government means the BoE will have to bear the burden of supporting the economy via lower rates.
Elsewhere, BoE governor Mark Carney will take centre stage as the central bank celebrates the 20-year anniversary of its independence. Prior to 1997, interest rate decisions were taken by the Chancellor, rather than by independent economists. The Bank, however, has since gained further powers. European Central Bank (ECB) president Mario Draghi, Federal Reserve vice chairman Stanley Fischer, as well as International Monetary Fund managing director Christine Lagarde, are also due to attend.
If BoE Governor Carney repeats that a rate hike may be needed, we could see GBPUSD shoot back up to 1.3500. However, if he leaves the market less than convinced that rates will be increased before the end of the year, GBPUSD could test support at 1.3285.
US durable goods orders beat consensus expectations with a 1.7% rise for August compared with the forecast 1% increase. The underlying increase was in line with consensus forecasts at 0.2% while there was a solid increase in capital goods orders which underpinned sentiment. The Euro declined to a four-week low just below the 1.1720 level against the Dollar before finding some support. Pending home sales data was weaker than expected with a 2.6% decline for August.
St Louis Fed President Bullard maintained his dovish stance on policy with a further warning that inflation expectations were too low. In contrast, Boston head Rosengren maintained his call for gradual increases in interest rates.
In the Eurozone yesterday, money supply growth increased to 5.0% in the year to August while private loans growth was steady at 2.7%. Further, German bund yields moved higher, providing the single currency some protection.
That said, German GfK consumer confidence for the October projection unexpectedly declined slightly to 10.8 from 10.9 in September. This suggests the election has cast its shadow but the full breakdown for the September reading showed a marked improvement in economic sentiment. It was also confirmed that current German Finance Minister Schäuble would step down in the next coalition to head the Bundestag, the national parliament of the Federal Republic of Germany, creating fresh policy uncertainties.
“Ahead of the October 1st Catalan unofficial vote on independence, tensions have stemmed the Euro support as the Catalan regional government have accused the Spanish authorities of behaving in a similar fashion to extremists North Korea.’’
Overall, there was no significant Euro impact yesterday, with the single currency still hampered by concerns over the outlook for economic reform. Otherwise today, we see data out for economic sentiment indicator and business climate and ECB’s hawk Lautenschläger Speech.
Data to Watch:
9:00am ECB’s Praet speech
9:15am BoE’s Carney speech
10:00am EUR Consumer Confidence, Services Sentiment, Economic Sentiment Indicator, Business Climate, industrial Confidence.
12:10pm ECB’s Lautenschläger Speech
1:00pm German Sept Consumer Price Index, year on year & month on month, Harmonised Index CPI
1:30pm US Initial Jobless Claims, Continuing Jobless Claims, GDP, Annualized GDP, Personal Consumption Expenditure & Core PCE.
2:45am Fed’s George Speech
3:15pm Fed’s Stanley Fischer Speech