Yesterday’s inflation report hearings had the head of the Bank of England Mark Carney, reiterating his stance that rates are likely to remain low for some time still. Although the Governor of the BoE said there is no need for negative interest rates like the Euro zone, expectations from the market on when the first rate rise might be seen in the UK are now firmly set on the back end of 2016. This was supported by the latest inflation report and the concern of a deflationary impact of a strong Pound. This saw Sterling hit a two week low against the Greenback and also saw losses against the Euro as markets deciphered these statements.
Germany, the powerhouse of the single currency zone released their Ifo business climate gauge and saw business confidence hit its highest level in 17 months. With the reading hitting a bullish 109.0 above the forecasted 108.3, this unexpected rise in confidence shows signs that the largest economy of Europe is robust enough to weather the recent Volkswagen emissions scandal, as well as the global slowdown. This positive data gave some support to the Euro, but with the likelihood of intervention from the ECB next Thursday these gains were only slight.
More positive data was seen from the US yesterday afternoon as the second reading of their Q3 GDP came out above expectations at 2.1%. This expansion was also faster than previously reflected in the first reading of 1.5%, which only bolsters the markets expectations for the Fed to pull the trigger come December and raise interest rates. The Dollar made gains against the Euro and the Pound as this was released as a result.
Looking ahead at today, markets will be awaiting the UK’s Autumn statement which will have George Osborne outline further government spending. All will wait to see how Mr Osborne will now tackle the crisis in home ownership, which was the main focus of the five year economic plan and also if there are to be cuts in local services and police. News will continue to unfold with tensions between Russia and Turkey, after a Russian fighter was shot down by Turkey. Turkey are stating that the Russian plane was in their airspace and Russia claiming that they were in Syrian airspace, more definitive answers will be waited for on how and why this happened.