14/07/2017 - BoE Policymaker Thinks QE Should Be Unwound

GBP

Sterling crept higher against a weaker dollar on Thursday after BoE policymaker Ian McCafferty told The Times newspaper in on Thursday that the central bank should consider unwinding its 435 billion pound ($562 billion) quantitative easing programme earlier than planned. However McCafferty's views do not represent the consensus on the Bank's Monetary Policy Committee (MPC). He was one of three who voted in favour of an interest rate increase last month, with five voting against.

The MPC member also stated that he will again be voting for a hike in August’s rate decision meeting stating that “as of today, I would not be changing my position”, with Mr McCafferty joining Michael Saunders and possibly Andy Haldane in voting for higher interest rates.

Britain published legislation on Thursday to sever political, financial and legal ties with the European Union, an important step towards Brexit but one which the opposition said it would challenge. The repeal bill is central to the government's plan to exit the EU in 2019, disentangling Britain from more than 40 years of EU lawmaking on everything from finance to fisheries and repealing the treaty that first made Britain a member in 1972.

However, parliament has yet to set a date to debate the bill, which will be closely examined to see how the government plans to carry out the difficult and time-consuming technical exercise of transposing EU law. Its passage through parliament could make or break Theresa May's future as prime minister. The election she called last month cost her an outright parliamentary majority and reopened the debate on the nature of Brexit, with Britain's public spending watchdog now saying the government is not well prepared.

May faces a battle even within her own Conservative Party to stick to her plan of a clean break. Pro-Brexit lawmakers will give her little room for movement, while pro-Europeans are looking to soften the divorce terms.

USD

Fed Chair Janet Yellen’s testimony to the Senate Banking Committee were very similar to the remarks made yesterday to the house financial services committee.

Ms. Yellen reiterated, that the Fed was paying close attention to the recent weakness of inflation. While emphasising that she expected prices to start rising more quickly, she said persistent weakness could lead the Fed to raise interest rates more slowly.

She noted that broader measures of the labour market were improving. The unemployment rate, which was 4.4 percent in June, counts people actively seeking work. Another measure also includes people who are not job-hunting but say they would like to work and part-time workers who want full-time work. This group made up 8.6 percent of the work force in June; a decade ago, in June 2007, it was 8.4 percent.

The economy is now in the ninth year of one of the longest economic expansions in American history. The economy added 180,000 jobs a month on average in the first half of the year, about the same pace as the first half of 2016, even as the unemployment rate dropped to pre-crisis levels.

Key Announcements 

13:30 – USD – CPI MoM; Forecast at 0.1% against previous of -0.1%

13:30 – USD – Core CPI MoM; Forecast at 0.2% against a previous 0.1%

13:30 – USD – Core Retail Sales MoM; Forecast at 0.2% against previous of -0.3%

13:30 – USD –Retail Sales MoM; Forecast at 0.2% against previous of -0.3%