Daily Market Report - 11/12/2015

GBP

Yesterday the Bank of England voted eight to one to hold interest rates as they expect oil prices to weigh further on inflation in the coming months. The Bank maintained its view from last month that inflation would not exceed one per cent until the second half of next year. Over summer it said inflation would exceed one per cent early in 2016, but moved the prediction to spring a few months later. It then shifted the forecast to the second half of next year last month. Inflation was minus 0.1 per cent in inflation and is forecast by the Bank to have been slightly positive in November

While the Bank warned oil prices could hinder the return of inflation to more normal levels over the next few months, it also said the market reaction to the US Federal Reserve lifting interest rates for the first time in nine years would be difficult to predict. It also warned: “The downside risks to growth in emerging market economies remained, however, with the risk of an acceleration of capital outflows in reaction to any increase in US interest rates.”

Ian McCafferty was the sole dissenter. He said the risks to domestic cost growth to the upside, and was sufficient to justify an immediate increase in Bank rate. The MPCs voting pattern has not changed since the summer.

USD

The number of Americans filing for unemployment benefits rose to a five-month high last week which disappointed the markets. Analysts believe it does not signal a deterioration in the labour market though as the underlying trend remained consistent with tightening conditions. A Labour Department analyst said there were no special factors influencing the data and only claims for Louisiana had been estimated as the state implements a new computer program.

The labour market resilience, despite slowing consumer spending and housing market activity, is likely to give the Federal Reserve confidence to raise interest rates next Wednesday for the first time in nearly a decade.

Key Announcements
13:30 – USD – Core retail sales are expected to increase to 0.3%
13:30 – USD –Retail sales are expected to increase to 0.2%
13:30 – USD – Producer Price Index is expected to increase to 0.0%