03/11/2017 - Pound Tumbles After BoE Raise Rates

GBP

The Bank of England raised interest rates for the first time in more than 10 years on Thursday, however  the pound was sold off  after the central bank said it expected only “very gradual” further increases as Britain prepares to leave the European Union. The Bank’s nine rate-setters voted 7-2 to increase the Bank Rate to 0.50 percent from 0.25 percent, reversing an emergency cut made in August 2016 after the Brexit vote. They sighted the Brexit talks were likely to be the biggest factor for the next BoE move on rates being either up or down depending on how negotiations progress.
 
The two Monetary Policy Committee members who voted to keep rates steady, deputy governors Jon Cunliffe and Dave Ramsden, said wage growth was too weak to justify a rate rise now. The Bank said debt servicing costs paid by British households and companies would remain “historically very low” despite Thursday’s hike as a number of fixed rate loans roll off and refinancing would be at considerably lower rates.  The Bank stuck with its forecasts that Britain’s economy would grow by 1.6 percent next year and by 1.7 percent in 2019.

USD

U.S. weekly jobless claims totalled 229,000 in the week ended October 28, below the 235,000 claims economists polled by Reuters anticipated. This was a 1.7 percent decline from the previous week, when claims totalled a revised 234,000. The number of people filing for unemployment benefits fell to a near 44-1/2-year low last week, offering further evidence that the labour market was tightening despite hurricane-related disruptions in September. The Labour Department said nonfarm productivity, which measures hourly output per worker, rose at a 3.0 percent annualized rate. That was the quickest pace since the third quarter of 2014 and followed an unrevised 1.5 percent rate in the April-June period.

Key Announcements

12:30- GBP: Non-Farm Payrolls (Oct) expected to increase to 312K from -33K

12:30- GBP: UK Unemployment Rate – Expected to remain unchanged at 4.2%