Posts belonging to Category Central Banks



Poor UK data leaves pound weaker

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17.

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17.

Less than impressive UK data left the pound weaker against the US dollar on Friday, and a general risk-off mood failed to limit Sterling’s losses against the Australian, New Zealand and Canadian dollars. The pound did hold firm against the euro however, with GBP/EUR managing to hold above the €1.1700 level.
GBP/USD dropped from $1.2473 to $1.2369 while GBP/NZD dipped from NZ$1.7908 to NZ$1.7795 and GBP/CAD slumped from C$1.6715 to C$1.6557.
GBP/AUD closed the week at AU$1.6500 but jumped by 0.5% on Monday as investors responded to the latest Australian housing data.
Accelerating consumer price pressures might force the BoE to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.
There were a number of UK reports on the data calendar on Friday, but unfortunately for the pound none of them offered much cause for cheer.
Both industrial and manufacturing production unexpectedly declined in February (by -0.7% and -0.1% respectively) while construction output dropped -1.7% on the month and slowed to 0.5% on the year.
The UK’s trade deficit also widened and the NIESR GDP estimate for March signalled a slowing in growth in the first quarter.
Demand for the pound also eased as Bank of England (BoE) Governor Mark Carney gave no indication that UK interest rates would be increased in the near future.
Meanwhile, the US airstrike on a Syrian military base limited demand for higher-risk currencies but sent oil prices to a new one-month high (boosting the Canadian dollar in the process).

The US dollar closed out the week in a broadly stronger position as the US unemployment rate fell to its lowest level since 2007.

Wise Money markets data coming up

Today we’ve got news from the Eurozone, in the form of the Sentix investor confidence gauge, and a speech from Federal Reserve chairwoman Janet Yellen.
If the Eurozone’s confidence index shows the improvement in sentiment forecast by economists the GBP/EUR exchange rate could be pressured slightly lower.
Similarly, any hints from Yellen that the Fed could increase the number of planned interest rate hikes in 2017 would put pressure on GBP/USD.
The first bit of exciting UK news, the nation’s inflation report for March, is due out tomorrow.
At the moment the consumer price index is expected to come in at 0.3% on the month and 2.3% on the year. Accelerating consumer price pressures might force the Bank of England (BoE) to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.

Euro runs into trouble as ECB dismisses idea of policy change

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17 (although this was largely due to euro weakness).

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17 (although this was largely due to euro weakness).

GBP/USD failed to climb back above the $1.25 level and GBP/NZD slid from its 2017 high, but GBP/AUD did push from AU$1.6471 to AU$1.6559.
Meanwhile, a one-month high for oil prices drove GBP/CAD from C$1.6793 to a low of C$1.6682.
A widening deficit or a slower pace of domestic growth may counter any positive impact from the production numbers.
The UK’s economic calendar was empty yesterday, leaving the pound to move at the mercy of external events.
GBP sentiment was solid mid-week thanks to the UK’s impressive service sector report, but concerns about overall growth slowing in the first quarter of 2017 left the pound fluctuating as the weekend approached.
Sterling was eventually able to march higher against the euro however as officials from the European Central Bank (ECB) indicated that the institution is happy with current monetary policy and has no plans to either taper quantitative easing or increase interest rates in the near future.
Draghi left the euro struggling when he stated; ‘We are confident that our policy is working and that the outlook for the economy is gradually improving. But even so, we have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook – which remains conditional on a very substantial degree of monetary accommodation. Hence a reassessment of the current monetary policy stance is not warranted at this stage.’

ECB Vice President Vítor Constâncio and Executive Board Member Peter Praet supported the view that borrowing costs aren’t likely to be altered any time soon. As well as dipping against the pound, the euro fell to a low of 1.0627 against the US dollar.

Wise Money markets data coming up

Before we kick back for the weekend we could see a final flurry of pound movement thanks to the UK’s industrial and manufacturing production numbers. Both measures have been forecast to show growth in February – a result that could be pound positive.
However, the day’s UK trade data and NIESR GDP estimate for March may limit pound gains if they show a widening deficit or a slower pace of domestic growth.
A speech from Bank of England (BoE) Governor Mark Carney is also on the horizon and his tone on the subject of interest rates could be key to how the pound closes out the week. Hints of a rate hike could send the pound soaring, but indications that rates are going to remain on hold for the foreseeable future would be negative for GBP.
There’s also some high-profile US news to focus on, in the form of the nation’s non-farm payrolls report. As solid growth in the labour market might convince the Federal Reserve that more than three rate hikes will be necessary in 2017, the US dollar could stop the pound breaching $1.25 if the NFP report exceeds expectations.
Finally, GBP/CAD volatility may follow the publication of Canada’s own jobs data. The unemployment rate is believed to have increased in March and (if that proves to be the case) the pound could close out the week trading higher against the Canadian dollar.

Sterling bounces back on service sector strength

Wednesday turned out to be pretty positive for the pound thanks to an unexpectedly upbeat UK services report.

Wednesday turned out to be pretty positive for the pound thanks to an unexpectedly upbeat UK services report.

GBP/EUR surged from €1.1645 to €1.1717, GBP/USD rebounded from $1.2439 to $1.2499 and GBP/AUD jumped from AU$1.6403 to AU$1.6539. GBP/NZD, meanwhile, struck its best levels of 2017 by advancing from NZ$1.7821 to NZ$1.7952.
Whether or not the GBP/EUR exchange rate is able to push comfortably above €1.17 largely depends on a run of speeches from ECB officials.
Yesterday’s pound gains were almost entirely driven by the UK’s services PMI from Markit.
As the services sector accounts for over 70% of total economic growth, the news that the index edged up from 53.3 to 55.0 in March was enough to send GBP exchange rates higher.
This was the strongest rise in service sector activity of the year so far, prompting this response from Duncan Brock of the Chartered Institute of Procurement & Supply; ‘Taking March in isolation, the service sector defied the slowdown experienced by construction and manufacturing firms. A stronger end to the first quarter from the biggest contributor to UK GDP will provide some relief to the UK economy as a whole, shaken and stirred by continuing highs and lows since the Brexit vote.’
The report was good enough to counteract the impact of Bank of England policymaker Gertjan Vlieghe asserting that there’s no need for UK interest rates to be increased anytime soon and the pound managed to hold gains overnight.

Wise Money market data coming up

There isn’t much happening in the UK today, so the currency market is more likely to be moved by developments in the Eurozone and US.
Whether or not the GBP/EUR exchange rate is able to push comfortably above €1.17 largely depends on a run of speeches from ECB officials.
Any references to the future path of monetary policy from ECB President Mario Draghi, Vice President Vítor Constâncio or Executive Board Member Peter Praet could inspire notable euro movement.
If the officials indicate that policy is unlikely to be adjusted for the foreseeable future, GBP/EUR could potentially advance to its best levels of the week so far.
However, any hints that either the central bank’s quantitative easing scheme could be tapered or that interest rates could rise sooner than expected would help EUR exchange rates climb before the weekend.
Over in the US we’ve got initial jobless claims and continuing claims numbers. Yesterday’s US employment report smashed forecasts and more positive jobs figures would lend the US dollar support ahead of tomorrow’s influential non-farm payrolls data.

US GDP economy grows by 2.9%

Friday’s GDP data release showed that the US economy grew at its fastest pace for 2 years in the 3rd quarter of this year.

Friday’s GDP data release showed that the US economy grew at its fastest pace for 2 years in the 3rd quarter of this year.

This positive news gives the Federal Reserve a huge backing with regards to their likely interest rate change in December. The growth was predicted to be around 2.5% but they have outdone themselves with a figure of 2.9%.

Consumer spending (making up two thirds of the world’s biggest economy) was a key factor in the positive numbers. The election campaign is expected to make for a volatile November for the dollar, but there is no major concern now for Yellen and co to make their expected move come December’s rate hike.

With a number of key figures in the UK recently resigning, being sacked or promoted, Mark Carney is said to have agreed to stay in his key role long term.

This has no doubt left some relieved as the Bank of England met with both Theresa May and Philip Hammond this week. There was some uncertainty around the Bank of England governor, but rumours have surfaced this weekend that he has agreed to stay in his position for the full 8 years expected of him.

Wise Money sees Super Thursday back this week

Super Thursday is back this week, as Mark Carney delivers what is expected to be a no change in terms of interest rates. There were hints at a second rate cut in the UK post Brexit, but a continued surprise in healthy data has left senior figures with no doubt that a downgrade in rates is not required.

Today we have Eurozone Consumer confidence, Gross Domestic Product, with German Retail Sales of note in terms of key data.

ECB monetary policy left unchanged

Sterling is higher this morning against the euro, after the European Central Bank’s (ECB) meeting at lunchtime yesterday failed to deliver any significant change.

Sterling is higher this morning against the euro, after the European Central Bank’s (ECB) meeting at lunchtime yesterday failed to deliver any significant change.
The ECB left monetary policy unchanged, as expected, with the refinancing rate remaining at 0.00% and the deposit rate at -0.4%. The euro briefly spiked higher after Mario Draghi said that there was no discussion, either on tapering the QE programme or extending it beyond the original deadline of March 2017.

Whilst sterling finished strongly on the euro, it wasn’t reciprocated on the US dollar, as strong US housing data released had the greenback soaring late in the session.

Portugal’s government bond yields at six week interst rates low

This morning, Portugal’s government bond yields are hovering near six week lows, ahead of a key review by Canadian ratings firm DBRS, out after the close of play today. Whilst this is slightly concerning for Portugal, they are expected to get through the test unscathed. If it were to be downgraded, it would fall out of the ECB’s QE programme.

Wise Money news to come

Today is fairly thin in terms of wise money news data, however we do have UK public finance figures out this morning. Whilst expected in lower than last month’s number, a lower figure shouldn’t dampen Sterling’s resurgence on the euro too much. Aside from this, most of the day will be spent interpreting the ECB press conference from yesterday, with many investors keenly watching Sterling/euro advances.

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.

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.