Super Thursday sends Sterling tumbling

Yesterday’s markets

4th August 2017

  • GBP - Services PMI: 53.8
  • GBP - BOE Inflation Report
  • USD - Unemployment Claims: 240K

It was Super Thursday yesterday and the Bank of England did not disappoint. The Bank of England released not only their Interest Rate Decision and vote but also their Quarterly Inflation Report. Firstly, the BoE left rates on hold at record lows of 0.25% and kept the asset purchase facility constant at £435bn. However, what did surprise the market was the rate vote itself. The vote reverted to 6-2 from last month’s hawkish 5-3, as members cited a drop-in inflation and that wage growth remained pretty weak. Bank of England Governor, Mark Carney, addressed the market shortly after. Carney said that the Central Bank now expect the economy to grow by 1.7% this year, down from May’s forecast of 1.9%, 2018 forecasts were also revised lower. However, the tone was not all dovish, as Carney mentioned that the BoE “might raise interest rates by a bit more than investors expect over the next three years, possibly within a year”. Sterling depreciated across the board, falling 1% against the Greenback and breaking through a key psychological level against the Euro.

On the data front, Services PMI from the UK and US were both released. It was the third and final UK PMI reading this week. The figure narrowly beat forecasts at 53.8, it is by far the most important of the three PMI’s from the UK as of course it accounts for nearly 80% of growth in the UK. However, today it has fallen on deaf ears as the Bank of England stole the show. In the afternoon, US ISM Non-Manufacturing PMI posted a worse than expected 53.9, its lowest reading in 11 months.

Today’s markets

3rd August 2017

  • AUD - RBA Monetary Policy Statement
  • USD - Average Hourly Earnings m/m
  • USD - Non-Farm Employment Change

The focus today switches to the States, with the release of the Average Hourly Earnings, Unemployment Rate and Non-Farm Employment Change. Unemployment Rate is expected to remain at 6.5%, whilst the Average Hourly Earnings is expected to grow to 0.3%. The biggest piece of data of the day, the all-important Non-Farm Payrolls is forecast to drop from last month’s 222k to 183k.