2nd August 2018 Market Update
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?? GBP – The Bank of England is widely expected to raise interest rates today to 0.75%, with some analysts pricing in a 90% certainty of this happening. Even if rates do rise, this may not necessarily lead to Sterling strengthening though as Carney’s following remarks will be critical. If he adopts a pessimistic tone and it is interpreted as a reluctant rate rise, Sterling could weaken in response despite the rise.
Today construction PMI is also being released from the UK, this is expected to drop slightly. With the Bank of England being in the spotlight, this might not have its usual market impact though.
?? EUR – Manufacturing data was released from across Europe yesterday. With the plethora of data though it makes it easier for the market to predict the outcome and it came out in line with expectations. Today there is no data of note from Europe.
There were murmurs in the press that Angela Merkel is leaning towards adopting a more flexible approach to Brexit, which would benefit the UK. However, there is nothing concrete at this stage so there has been no market response.
?? USD – Yesterday the FOMC’s statement was released as interest rates were held at 2.00% – as the markets had expected. The statement was positive, as the FOMC felt the labour market had continued to strengthen along with economic activity. ADP non-farm employment change was better than expected, which helped the dollar maintain its momentum yesterday. This was despite ISM manufacturing PMI being released below expectations. There is nothing of note being released from the US today.
09:30am: Manufacturing PMI (Jul)
12:00pm: BoE inflation report, MPC official bank rate votes, monetary policy summary, official bank rate
12.30pm: BoE Gov Carney speaks
Summary: Yesterday the FOMC’s statement was released as interest rates were held at 2.00% – as the markets had expected. The statement was positive and along with ADP non-farm employment data which was better than expectations the result was the dollar strengthened yesterday. Manufacturing PMI came out from the UK roughly in line with market expectations, having minimal market impact.
The Bank of England is widely expected to increase interest rates today to 0.75%. However, even if rates do rise this may not be positive, and Mark Carney’s statement following the decision will be key in determining market movement. Today construction PMI is also being released from the UK, this is expected to drop slightly.
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