Daily Market Report 10/02/2014

GBP

The pound fell for a second week against the dollar as reports showed that both the manufacturing and services sectors slowed in growth last month strengthening the case for the Bank of England to keep interest rates at a record low.

Sterling posted its biggest weekly loss versus the euro in almost a year after the central bank kept the benchmark interest rate at 0.5% on 6th February.

USD

Global equities made strong gains at the end of a volatile week that was largely dominated by uncertainty over the outlook for the US economy.

Friday’s stock market gains came even as a disappointing US employment report added to concerns that momentum in the world’s biggest economy was slowing – which could affect the Federal Reserve’s plans to scale down its stimulus measures.

Non-farm payrolls only rose by 113,000 last month, much less than what was expected. This was mainly due to the fact that the number of people who are actively seeking employment in the US has dropped off. Payroll growth appears to have slowed but, given the strength of economic growth in the second half of last year, a possible rebound is expected in the monthly gains over the next few months.

However a bit of good news came from the fact that the unemployment rate slipped from 6.7% to 6.6%. But nonetheless, the US dollar weakened across the board.

This Week

The main focuses of the week look set to Wednesday’s Quarterly Inflation Report from Mark Carney and the Bank of England and Janet Yellen’s first speech as newly appointed Chair of the Federal Reserve.

Recent talk in the markets has suggested that we could see Carney suggest changes to be made to the Bank of England’s current Forward Guidance plan. There are some suggesting that another criteria may be added to raise interest rates given that the rate of unemployment has dropped far quicker than the Bank had been expecting. Some are even suggesting that the BoE may scrap Forward Guidance altogether; which could be detrimental to the pound given the level of uncertainty it would bring into the markets.

Today

No significant events or data today.