02/02/2017 - FOMC Remains Positive, BoE Report Out Today

USD

Last night's Federal Open Market Committee meeting was upbeat on the US economy. The central bank kept its benchmark interest rates between 0.5% and 0.75% in its first meeting since President Donald Trump took office.

The statement said that the jobs market and economic activity had continued to strengthen and that measures of consumer and business sentiment have improved of late.

The Fed also said that inflation "will rise to 2% over the medium term", but did not comment on the effect of the Trump administration's plans which many believe could lead to the prospect of higher inflation.

Janet Yellen has previously warned that, with the economy near full employment, the central bank risked a "nasty surprise" on inflation if it was too slow with rate hikes. However, the central bank also signalled the Federal Open Markets Committee (FOMC), the body which sets rates, would still only make "gradual increases".

The non farm estimate ADP figure showed that private employers added 246,000 jobs in January, significantly above economists' expectations. The ADP figures come ahead of the US Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

GBP

The Pound strengthened yesterday morning after a strong performance by the manufacturing sector, which has rebounded since the Brexit vote, to record its sixth consecutive month of expanding output.

The report detailed how manufacturers were forced to hike the cost of their goods by one of the widest margins in one month after the slump in the pound triggered a record rise in the cost of imports.

Analysts indicate that the rising cost of imports is expected to push up the price of UK-made goods over the coming year and send inflation from 1.6% to nearer 4%.

Bank of England policymakers are expected to highlight in their quarterly inflation report released today that price pressures in the economy are growing, especially in the manufacturing industry; because the sector relies heavily on raw materials and components brought in from overseas.

Key Announcements

09:30 - GBP : Construction PMI is forecast to fall to 53.9

12:00 - GBP : BOE Inflation report

12:00 - GBP : MPC Official Bank Rate

12:00 - GBP : Monetary policy summary

12:00 - GBP : Official Bank Rate

12:15 - EUR : ECB President Draghi Speaks

12:30 - GBP : BOE Gov Carney Speaks

13:30 - USD : Unemployment Claims