02/11/2017 - BoE Expected to Hike for the First Time in 10 Years

GBP

Sterling steadied against the euro on Wednesday after peaking at a 4-1/2-month high, as strong UK factory data bolstered expectations of an imminent Bank of England interest rate rise.

With a rate rise decision today largely priced in, investors will be focused on the degree of unity among BoE rate-setters as they gauge the likelihood of further increases. BoE Governor Mark Carney is expected to reveal the first hike in UK borrowing costs in more than a decade at 1230 GMT on Thursday following the Bank’s quarterly inflation update.

Signs of progress in Brexit talks have also given a boost to sterling this week, including comments by the European Union’s chief Brexit negotiator Michel Barnier, who said on Tuesday he was ready to move onto the next stage of talks.

USD

The Federal Reserve refrained from raising interest rates at its policy meeting this week and said the late-summer hurricanes likely will not have much longer-term impact on overall economic activity. There was little in the post-meeting statement Wednesday to indicate that the Fed would hold off on raising rates again soon.

As widely anticipated, the Federal Open Market Committee, the central bank's policy making arm, held its benchmark interest rate target between 1 percent and 1.25 percent. Markets also currently expect the Fed will approve a quarter-point hike at the December meeting, 

The ADP National Employment survey showed private U.S. employers added 235,000 jobs in October, surpassing estimates for 200,000 and setting up expectations for a strong U.S. nonfarm payrolls report on Friday. The ADP number was the latest in a string of strong data releases on the U.S. economy that have backed the Federal Reserve’s stance that weakness in reports earlier this year was transitory.

Key Announcements

09.30 – GBP – Construction PMI; Forecast at 48.3 against previous of 48.1

12.00 – GBP – BOE Inflation Report

12.00 – GBP – Official Bank Rate expeted to rise from 0.25% to 0.5%

12.30 – GBP – BOE Gov Carney Speaks

12.30 – USD – Unemployment Claims; Forecast at 235K against previous of 233K