Following an intensely volatile day on Wednesday, the markets appeared to be in a state of consolidation on Thursday aided by a relatively quiet day in the economic calendar.
The pound remained almost unmoved throughout the morning trading session against the euro and the dollar. Following the Bank of England’s quarterly inflation report, the ECB published their monthly report on Thursday morning reiterating its previous stance that interest rates should remain unchanged and they will continue to adopt an accommodative monetary policy (which may include lower interest rates) for an extended period of time. It also revised down its inflation and growth forecasts for 2014. Overall the economic outlook for the euro zone still harbours downside risks but a good run of recent euro zone data has helped the euro maintain its bullish position for the moment.
From the US, the initial jobless claims figure still increased from the previous week although not by as much as expected. Initially this news did not affect the dollar’s position however as the afternoon session progressed, the dollar weakened allowing the pound to push up to the highs not seen since the middle of June. As talks of a reduction in QE in the US continues to circulate, the dollars position will remain in doubt.
Early on Friday morning China posted a mixed bag of results seeing a decline in retail sales year on year but an increase in industrial production. This news has done little to affect the markets on the final day of the week and on another quiet day, no large movements are expected.
Looking ahead to next week, UK inflation, Bank of England minutes and euro zone GDP data will be in focus as well as retail sales and industrial production from the US.
13.15pm – CAD – Housing Starts (Jul) Expected to fall to 193,500
13.30pm – CAD – Unemployment Rate (Jul): Expected to remain at 7.1%.