Daily Market Report 02/08/2013

Thursday witnessed one of the big risk events in the UK’s economic calendar in the form of the Bank of England’s interest rate decision. All expectations were for the interest rate itself and the stance on quantitative easing to remain constant however investors were keen to see if Mark Carney would once again make any unscheduled announcements.

Before the BoE and ECB rate decisions at lunchtime, the pound experienced some minor relief against the euro and the US dollar as manufacturing PMI beat the previous month by a fairly healthy margin. Although taking into consideration other events in the economic calendar, this news was really overwhelmed by the higher risk event.

The Bank of England’s decision was as expected – no change. Mark Carney was also nowhere to be seen (or heard) so the pound remained constant. At least for short while. The ECB also held their interest rates on hold however Mario Draghi indirectly hinted at possible future cuts by stating that ‘we are not at zero’. He was relatively positive over the general economic health of the euro zone and this was reflected in the euro as it gathered some momentum over the pound.

Once again the dollar was the biggest winner of the day as initial jobless claims and manufacturing data from the states once again pointed to a strong dollar. Following Bernanke’s comment on Wednesday where he did not seem to show too much concern over the labour situation in the US, non-farm payrolls on Friday are expected to show another improvement with the overall unemployment rate falling to 7.5% from 7.6%.

The pound will most likely be under pressure until the Bank of England’s quarterly inflation report next week. Many analysts are predicting policy changes within the Bank of England at this time which would spark further uncertainty for the future of the UK’s economy.

Key Announcements:

9.30am – GBP – PMI Construction (Jul): Expected to rise to 51.6.

10.00am – EUR – Producer Price Index (Jun): Expected to rise to 0.2%.

13.30pm – USD – Nonfarm Payrolls (Jul): Expected to fall to 184,000.

13.30pm – USD – Unemployment Rate (Jul): Expected to fall to 7.5%.

15.00pm – USD – Factory Orders (Jun): Expected to rise to 2.3%.

17.15pm – USD – Fed’s Bullards Speech