The pound weakened as details of the Bank of England’s first unanimous decision on monetary policy since July dampened the outlook for higher interest rates that would support the currency. Sterling fell against 13 of its 16 major peers after policy makers Martin Weale and Ian McCafferty dropped their call for an interest-rate increase as plunging oil prices raised the risk that slow inflation would become entrenched. If interest rates are raised now it would add to deflationary pressures as people would have less money to spend on good and services.
Separate data showed wage growth in the three months through November was less than analysts estimated. However, with wage growth at 1.7% year on year and inflation at 0.5% year on year, in real terms the general public is better off and has more disposable income. The Monetary Policy Committee also forecast that U.K. inflation will drop to zero in the first quarter and there’s a roughly equal chance that it could fall lower.
The U.K. unemployment rate also declined to a six-year low of 5.8 percent from 6 percent. Analysts had forecast a drop to 5.9%.
Yesterday two euro-area central-bank officials said ECB president Mario Draghi and his Executive Board are proposing to spend 50 billion euros a month through December 2016. Immediately on the back of this the Euro did strengthen, but lost its gains as the afternoon went on. Some Analysts al yesterday stated that Draghi should be ambitious with his plans for QE and said there should not be a cap on the amount of money pumped into the Eurozone.
Yesterday Canada were cut down interest rated to 0.75% from 1% which had been in place since September 2010. The main factors behind it are geared towards balancing out the effects of cheaper oil prices and inflation, along with minimising the impact of a potential downturn within the housing market. Canada also cut it's growth and inflation forecasts for the year.
EUR - 12:45 - ECB interest rate decision expected to remain unchanged
EUR - 13:30 - ECB Monetary Policy Statement and Press Conference
USD - 13:30 - Initial Jobless Claims expected to fall to 300K from 316K
USD - 13:30 - Continuing Jobless Claims expected to fall to 2.41M from 2.42M
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