10th May 2018 Market Update
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?? GBP – With no news from the UK yesterday, the market traded in anticipation of the Bank of England’s interest rate decision today. The pound made muted gains across the day but there is now little expectation for a rate hike.
Away from the interest rate decision today, we also have manufacturing production due this morning. UK data has been poor recently a continuation of this could see the pound start the day’s proceedings on the back foot.
?? EUR – Favoured much of last year to shake off a ‘lost decade’ and return to some form of normality. With data struggling the ECB has suddenly got cold feet on the prospects of a reduction of QE, this has turned the market sour on the EUR. With no data releases yesterday and only the ECB economic bulletin, which is unlikely to provide any new information, the euro is likely to be bullied around by its peers.
?? USD – The dollar has spent the whole of last year and the start of this year as the ‘whipping boy’ of the currency markets. The dollar’s robustness has been evident the last few weeks however with other Western economies stepping back from their own hiking cycles giving the dollar the chance to shine. Producer prices fell yesterday but the dollar remains healthy.
Today, inflation will be key as a slight increase above the 2% target is expected.
09:00am: Economic Bulletin
09:30am: Manufacturing Production YoY expected at 2.9% from previous 2.5%
09:30am: Industrial Production YoY expected at 3.1% from previous 2.2%
12:00pm: BoE Interest Rate Decision expected to hold at 0.5%, BoE Minutes
12:30pm: BoE Governor Carney Speech
13:30pm: CPI expected at 2.2% from previous 2.1%
Summary: Sterling inched up yesterday as markets await in anticipation for today’s interest rate decision from the BoE. Traders had been expecting a second interest rate rise in over a decade until Governor Carney and poor UK data poured cold water on the prospect.
Futures markets now price less than a 10% chance of a rate rise, if they went against expectations and raised rates expect the pound to make up some of the ground lost over the last few weeks, particularly against the dollar.
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