Daily Market Report - 19/03/2015

The pace of growth in British workers' pay slowed in January, hit by fewer bonus payments, while the percentage of people in work rose to an all-time high. Britain's unemployment rate was stable at 5.7 percent, matching its lowest level in almost seven years but above a forecast for another fall to 5.6 percent from economists.

Annual growth in weekly earnings in the 3 months ending January dropped to 1.8% from 2.1% in the 3 months ending December. However, growth in real earnings, the goods and services that can be bought with earnings remains robust with the last reading for inflation at 0.3% in January. 

Bank of England policymakers are concerned a further rise in sterling, particularly against the EUR could leave inflation below target for longer. A higher exchange rate could effect inflation because it makes it harder for companies to sell overseas because of a rise in the cost of their goods. Exporters then may choose to cut their prices to make their goods more attractive to overseas buyers.

The minutes also showed all nine members thought the very weak short-term outlook for inflation warranted keeping interest rates on hold at a record low 0.5 percent. Like last month, two members described their decision as finely balanced,  however there was no repeat of another member's view that a cut in interest rates in the immediate future could be on the cards.
Explicit comments from the BoE about the outlook for the exchange rate are rare, although Governor Mark Carney warned last week that the impact of rising sterling on inflation could last for some time. 

The Federal Reserve yesterday edged towards a much anticipated first rate hike since 2006 by removing the word ‘patient’ from its language. However, the USD did weaken as markets bet on a September rate hike rather June after it downgraded the expected the pace of growth and inflation. In a statement released from the meeting, the committee said it anticipates that it will start to raise interest rates once it has seen further improvements in the labour market and is reasonable confident that inflation will move back to its 2% target over the medium term.

Key Announcements
USD - 12:30 - Initial Jobless Claims expected to rise to 292k from 289k
USD - 12:30 - Continuing Jobless Claims expected to fall to 2.41M from 2.418M%

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