FED keeps loans interests rate unchanged

There was no surprise from this week’s FED meeting, as Janet Yellen announced there would be no loans interest rate hike in September.

There was no surprise from this week's FED meeting, as Janet Yellen announced there would be no loans interest rate hike in September.

The interest rate has not moved since last December’s decision to move interest rates from 0.25% to 0.5%. Another rate hike in December 2016 is now looking a shoe in.

It seems that unless global economic sentiment deteriorates in the next few months, December is seen as a good time to move again. As key data solidified in recent months, the Fed now want to see ‘economic progress’. Employment and inflation will be scrutinised until the end of the year, and the Fed members seem more aggressive as three voted to move rates, where as in July there was just the one.

UK’s public sector net borrowing falls

The UK’s Public Sector Net Borrowing fell in August, as the latest figures from the Office for National Statistics were released. The Public borrowing figure has dropped to £10.5 billion from July, down £0.9 billion from a year earlier, but the numbers had been expected to fall an additional £500 million. UK Borrowing in the present economic year to date has touched £33.8 billion, which is £4.9 billion lower than the previous year.

The ONS did say that ‘there was no clear sign of Brexit voting affecting the figures’. They also added that ‘receipts from income and corporation taxes rose strongly compared with a year ago, but VAT receipts rose at their slowest annual pace since March 2015′.

Also out was positive car production news in the UK, as car production touched a 14 year high in August. According to the Society of Motor Manufacturers and Traders (SMMT), just over 109 K vehicles were released from manufacturers hands, up 9.1% year on year.

Attention shifts to Sterling

Following a bit of an anti-climax after no policy changes from the FED on Wednesday we only saw a narrow trading range of about 100 points on the GBPUSD pairing yesterday. We surprisingly saw an even narrower trading range on GBPEUR yesterday considering we had the President of the ECB, Mario Draghi speaking at 2 pm. Further to this, he gave a speech at the first annual conference of the ESRB (European Systemic Risk Board) where he discussed overbanking in Europe and macro-prudential policy. We didn’t see too much market movement during this speech as it was mainly focussing on the broader picture of the over European banking system.

Attention focuses on Eurozone and US PMI

With not much news to drive the market today, the attention will be focussed on Eurozone and US PMI. So far, both have shown resilience in the face of the UK’s vote to leave the EU although analysts will be watching for hints of pre-election nerves within the US economy.

Bank of England leaves interest rates on hold

Wise Money is pleased with loans interest rates news from Bank of England.

Wise Money is pleased with loans interest rates news from Bank of England.

The Bank of England rate decision meeting didn’t provide any fireworks last week, as UK policymakers voted 9-0 in favour to keep interest rates unchanged. Despite signalling further rate cuts in the future, the decision didn’t come as a surprise considering the amount of stimulus they introduced last month.

The central bank is monitoring recent data closely, and they are encouraged to see that the stimulus package seems to be working, as recent data has been fairly positive and at times even better than market expectations.

It appears that investors are still not worried about the implication of the Brexit, at least until they find out what it really means. For this they will have to wait until article 50 is invoked early next year.

Busy money market data releases

It has been a very busy 24 hours in terms of economic releases. In the US, data came in softer, led in particular by a disappointing retail sales number. Headline sales were down -0.3% last month, the first decline in 5 months. Excluding autos and gas, spending fell -0.1%. Industrial production also declined in August, printing -0.4% against a market expectation of -0.2%.

It wasn’t all bad news though, as manufacturing activity encouragingly bounced back in the New York and Philadelphia regions, but it is not enough to convince investors that the FED will have enough reasons to lift interest rates next week.

Data in Europe will be quiet with final Q2 wages numbers due out in France. In the US, investors will closely look at August CPI report with market expectations of an increase of +0.1% month on month. Those numbers also match the views of our US economists. As always in the US, the University of Michigan consumer sentiment is scheduled for release.

Wise Money watches FED eyeing US data

The US FED is watching the to non manufacturing data to decide on interest rate hike.

The US FED is watching the to non manufacturing data to decide on interest rate hike.

Sterling has started the week on the front foot after last week’s positive manufacturing PMI print coupled with a better than expected services PMI sector. With Friday’s US non farm payroll data falling considerably short of expectations, the Pound rallied and GBPUSD currently finds itself trading just over the 1.33 mark.

The weak print from the US jobs data put pressure back on the Federal Reserve on the interest rate decision given that they were so heavily banking on employment numbers. At the Jackson Hole symposium last month, Janet Yellen and various Fed members were fairly hawkish on increasing interest rates but the fall in job growth has meant that analysts are now expecting the next hike in December at the earliest, if any.

However, later today, we are expecting data from the US including ISM non-manufacturing composite numbers which will be heavily watched by the markets as it could be the last resort to finalise any action from the Federal Reserve.

GDP revisions and retail PMI numbers expected from the Eurozone

From the Eurozone, second quarter GDP revisions and August’s retail PMI numbers are out today which could put further pressure on the euro. Last week’s manufacturing PMI data fell well short of expectations from the Eurozone and news flow and economic sentiment have rapidly deteriorated over the past fortnight.

Given such uncertainty, all eyes will turn to the ECB meeting later this week as markets are preparing themselves to see what stimulus measures the European Central Bank will further undertake.

In the midst of weak data from the US and the Eurozone, coupled with surprisingly positive data prints from the UK, Sterling seems to be enjoying a steady consolidation phase for the moment although any sharp moves up are fairly limited due to the uncertainty and forthcoming negotiations on how ‘Brexit’ will pan out.

A 10 year treasury gilt auction makes for the sole activity on the economic calendar for the UK today.

Wise Money waiting for key US data on Friday

Today we have US employment data which will give us a taster as we build up to the key non farm payroll data on Friday.

wisemoney US employment data which will give us a taster as we build up to the key non farm payroll data on Friday.

Feedback from the labour market is the highest consideration, as the FOMC judge whether it is appropriate to increase interest rates. On Friday the payroll data is expected to come in at a healthy 175k, and average earnings are likely to increase by 0.2%.

We could also see the unemployment rate fall slightly to 4.8% from 4.9%. If we see positive US data this week, it will build expectations for a September rate hike and lead to USD gains.

Eurozone inflation softer for August

In the Eurozone, CPI for August (y/y) has come in slightly softer than expected at 0.2% vs 0.3% expected. In addition, the unemployment rate for July has been confirmed at 10.1% which is in line with forecast. This morning the euro has been on the back foot and disappointing inflation data will not help this trend.

Pound finds tentative momentum

The Pound has managed to pick up this morning against the euro and the USD. Following a better run of UK data this week, the pound is finding some tentative momentum. Tomorrow we have UK Manufacturing PMI, and on Friday Construction PMI to give further feedback for the UK economy.

Pound up after bank holiday weekend

After the 3 day weekend, the markets have opened up after fully digesting the Fed Jackson Hole meeting with the Pound increasing over the bank holiday weekend.

After the 3 day weekend, the markets have opened up after fully digesting the Fed Jackson Hole meeting with the Pound increasing over the bank holiday weekend.

Janet Yellen’s suggestion that a rate rise is still likely has seen the FTSE strengthen again by 0.3%, but oil has stated to come under renewed pressure.

With a hike now potentially in September a real possibility, Brent Crude found itself trading below $50 per barrel once more and with that, the price for those who do not hold US Dollars as their base currency will find all oil based products more expensive to purchase.

Number of investments coming into UK at year high

The number of investments that come into the UK was at a year high, up a big 11%.

A number of the 116,000 jobs created were said to have been created from overseas investments, also showing the UK as the most appealing region in Europe to do business.

A number of reasons were given as to why the UK attracts so well, such as the English language (spoken globally), fair tax and EU membership, which could now become a hindering block after Article 50 is triggered.

Today’s key data is mixed in terms of geography, with UK Mortgage Approvals, Fed’s Fischer speaking on Bloomberg and German Consumer Price Index out today which may move the markets.

Sterling performs well thanks to record UK jobless

Sterling had a much better day trading yesterday against all its major currency pairings, as the UK Jobless Claims total fell to a record 1.64 million.

Sterling had a much better day trading yesterday against all its major currency pairings, as the UK Jobless Claims total fell to a record 1.64 million.

The numbers from April to June showed that the total fell by just over 50,000, with official figures indicating 31.75m people (74.5%) are currently in work.

Wages with and without bonus’ also showed gains, as the current claimant count for July displayed an 8,000 drop in actual claimants since the surprise Brexit vote.

Conversely Fed Reserve hints at interest rate hike

The minutes of July’s Federal Reserve meeting has hinted at another interest rate hike before the end of the year, but there was a clear division between members.

The FOMC looked to be nearing another move, as job growth and the sharp market recovery (post Brexit) has been a major factor; but a low inflation figures lack of rise, and staying towards its 2% target is still a concern.

With unemployment levels in the US below 5%, one Fed Member, Esther George, wanted a further hike in rates as ‘the economy is at or near full employment’.

Money news to come

Today we see GBP Retail Sales, Eurozone Construction Output & Consumer Price Index, along with Initial Jobless Claims and Continuing Claims.

UK interest rates cut to 0.25%

The Bank of England’s has cut interest rates by half to a new record low of 0.25%.

Bank of England’s cut interest rates by half to a new record low of 0.25%.

In addition the Bank of England (BOE) launched a massive stimulus package designed to save the UK economy from recession.

The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to slash interest rates to an all time low; they also hinted that it might cut rates “close to but a little above zero” and could unleash more Quantitative Easing if needed.

With a 60 billion government bond buying program and a new initiative to buy 10 billion pounds of corporate bonds, the Bank of England hope to support the necessary adjustments in the UK economy following Brexit.

Mark Carney and the Bank of England think that the outlook for growth has “weakened materially” and they anticipate that the pain will be felt in 2017 as their Quarterly Report shows 2017 forecast slashed from 2.3% to 0.8%, the largest downgrade to its growth forecast to date.

Inflation is forecasted to increase thanks to the weakness of the pound, with the Central Bank now anticipating to hit their 2% target in Q4 of 2017 as opposed to Q2 of 2018 as previously anticipated.

The unemployment rate is also expected to rise to 5.4% in Q3 2016 compared to a previous forecast of 4.9%.

From the US to Europe, other data to come

After Super Thursday, the market will look at the US non-farm payrolls. Following the strong increase in June, a majority of economists are now expecting a weaker number with job growth around 180,000 as Wednesday’s ADP employment report showed signs of softness in the employment components of both ISM reports.

Looking at the day ahead the rest of the data due out in Europe will be overshadowed. Germany factory orders numbers for June, the latest trade balance reading for France and the latest UK house price data are the main data this morning before the market turns its eyes to the July employment report in the US.

Theresa May wastes no time in planning UK’s Brexit strategy

Theresa May is wasting no time in planning the UK’s Brexit strategy as she travels to Germany and France for discussions.

Theresa May is wasting no time in planning the UK's Brexit strategy as she travels to Germany and France for discussions.

Two of the more significant economies of the EU are keen to meet and begin discussions about an exit plan with the new PM. They have both stressed that no in depth proposals will be looked at until Article 50 is triggered.

Canada is the latest country to have ‘shown interest’ in the form of a trade deal to the UK since the referendum outcome, which if true will no doubt have investors starting to believe in the pound again. Other stronger nations such as the US, Australia and India to name a few have also potentially sounded out a trade deal.

London mayor launches #LondonIsOpen

London Mayor Sadiq Khan has been on the front foot this week, launching #LondonIsOpen, aimed to keep investors ploughing their funds into UK Markets and hoping to keep tourists flocking to major parts of the UK. The campaign has been backed by senior political figures, business leaders and celebrities alike.

Today we get to digest data from the UK & EU, with GBP Consumer Price Index figures out at 0.5% against previous showing of 0.3% which has boosted the pound slightly plus German ZEW Survey.

US Dollar surges after non farm payroll boost

The US Dollar received a boost in trading, as did stock markets after the non farm payroll report was released.

The US Dollar received a boost in trading, as did stock markets after the non farm payroll report was released.

With job numbers in the US soaring by 287,000, way above the 170,000 expected number; investors flocked to the US dollar to find stable ground, as uncertainty lingers in the Eurozone after the Brexit vote in the UK.

However, gains were slightly capped for the Greenback, as average weekly earnings are still muted, though markets still seem to be moving towards a risk off scenario.

Despite the strong labour report, talks of an interest rate hike seem to be off the table for the near future from the Federal Reserve, as we move back into market consolidation mode.

As far as economic data goes, the US starts us off with the Conference Board Employment Trends Index and the Federal Labour Market Conditions Index, coupled with a speech by FOMC member George.

Concerns over Italian banks mount

Meanwhile in the eurozone, concerns over Italian banks continue to mount, though analysts still insist that internal stress tests for the banks reveal they are resilient and do not need any bailout funds. Euro area finance ministers are due to meet in Brussels today on a fairly quiet start to the week on the economic calendar.

Sterling subdued

Sterling remains subdued and under pressure after the Brexit vote; as markets are likely to remain in limbo until we have a leader of the Conservative Party to carry out the trigger to Article 50. The pound has slid down further after Friday’s positive US data, and currently GBP/USD is trading well below the 1.30 level.

Most of the focus for the UK currency markets will be on tomorrow’s speech by Bank of England Governor Mark Carney on financial stability and the inflation report hearings to provide further direction. The BRC Retail Sales Monitor is due for release today and will provide interim direction for the pound.

UK votes to Leave eu in BREXIT

After the UK’s vote to leave the EU following a very close sentiment, Sterling has weakened significantly- but is bouncing back from it’s lows.

UK votes to Leave eu in BREXIT

There is a factor of uncertainty within the markets which has caused a lot of major sell-offs. Further to this, GBPUSD has opened this morning at a 30 year low, representing a fall of around 10% from last night’s peak, after breaking through key resistance levels.

This volatility is emphasised by the fact that there has already been a 2% bounce back. Naturally, a heavily declining rate is being seen across other Sterling focused currency pairings.

For the rest of the day, Sterling looks to remain under a lot of pressure, as will EURUSD. The next main focus will likely be the contemplation of the aftershock and how to deal with the uncertainty that is sure to follow the referendum’s result.

Sharp reactions on the money markets

It was widely expected that a remain vote would be seen after all of the polls released and therefore, it comes as no surprise that the markets reacted sharply when the contradicting news came in this morning and last night.

Looking out to the rest of the day, it’s likely to be chaotic and busy in the world of trading. It’s not just currencies that are being affected either – we’re seeing huge risk off moves elsewhere, including within the futures and commodities markets, just to name a couple.

Further to the general impact, it would come as no surprise to see central banks tightening their financial conditions and cutting interest rates. We’re also likely to hear from the ECB soon. Politics will determine the long term cost and with David Cameron resigning this morning, there is yet another factor of uncertainty on this side of the Brexit.