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Focus turns to BoE meeting after disappointing data

  • UK Manufacturing Production m/m: -0.8%
  • UK Trade Balance: -11.1B
  • CAD Building Permits m/m: -0.6%
  • NZD Official Cash Rate: 2.75%
  • RBNZ Rate Statement 
  • AUD Employment Change: 17.4K
  • AUD Unemployment Rate: 6.2%
  • CNY CPI y/y: 2.0%

Sterling gained strength on Tuesday after positive M&A activity surrounding Amlin  PLC and  Japanese MS&AD Insurance Group Holdings Inc, however we saw sentiment take a slight turn on Wednesday. The main reason was due to dovish UK manufacturing data which had a weak month in July. Manufacturing output was down 0.5% compared with the same month in 2014 whilst being down 0.8% for the monthly figure. The reason for this decline is down to the fall in metal products and transport equipment, which has also been damaging the secondary sector PMI data of late as well. Meanwhile Chancellor Osborne’s  quote “we're going to get Britain making things again” seems a distant memory as the trade deficit continues to show how much more the country is importing than it is exporting. The overall deficit in the trade in goods and services was estimated to be £3.4bn in July, up £2.6bn from June.

There was further evidence that the US economy’s recover appears to be robust. The July JOLTs job openings figure rose to 5.75 million, beating expectations for 5.3 million. This is closely eyed by the Federal Reserve. Increasing number of job openings are a positive sign for the economy and also for the central bank. The market continues to procrastinate on when “lift off” in rates is due. Our view remains that September is now off the table, however we do believe that an outside chance for October remains if we see data continuing to be robust.

  • UK Halifax HPI m/m
  • UK MPC Official Bank Rate Votes
  • UK Official Bank Rate
  • UK Asset Purchase Facility
  • UK MPC Asset Purchase Facility Votes
  • UK MPC Rate Statement
  • UK Monetary Policy Summary
  • US Unemployment Claims

Looking to the day ahead, the focus of the market will be on the BoE interest rate decision. It is expected that there will be a single dissenter call for a hike in rates amongst the voting committee. However this is very much expected. The main focus will be on the MPC statement. The market will decipher the statement for clues on when interest  rates could increase in the UK. In addition, following ECB President Draghi’s dovish tone surrounding the current climate, could the BoE follow suit?