02/11/2018 - Hawkish BOE Pushes Pound

GBP

Sterling reached a 2-week high against some of its major counterparts yesterday after a relatively hawkish meeting from the Bank of England. The Bank’s Monetary Policy Committee (MPC) voted 9-0 to leave rates unchanged at 0.75%. Market expectations and uncertainty over Brexit is the main reasons as to why the interest rates stayed the same.

From the meeting, the positives outweighed the negatives with household consumption continuing to be greater than expected, supported by the strong labour market and consumer confidence. On the other hand, business investment has been more subdued than previously anticipated, as the effect of Brexit uncertainty has intensified. Bank of England Governor Mark Carney was quoted saying that a smooth Brexit could see a rebound in investment by businesses.

British and European officials are playing down reports that a Brexit deal has been reached that would provide access to the single market after the U.K. leaves the bloc. This puts down speculation created by Dominic Raab who stated that a deal between Britain and the EU could be concluded as early as November 21st. The European chief Brexit negotiator Michel Barnier tweeted on Thursday that the bloc was ‘ready’ to have ‘close regulatory dialogue’ with the UK but dismissed the report that a deal on banks accessed to the single market saying it was misleading.

Figures released earlier in the session showed UK manufacturing growth slumped to the lowest since the aftermath of the Brexit vote. U.K. companies are suffering from Brexit uncertainties, global trade tensions and weaker demand for cars, hurting domestic and foreign demand.

Key Announcements

12:30 - USD: Average hourly earnings expected to fall to 0.2%
12:30 - USD: Unemployment rate
12:30 - USD: Non-farm employment change expected to increase to 193k