Daily Market Report 07/08/15

Yesterday saw the Bank of England implement its “super Thursday” and release several key pieces of fundamental data in a shotgun approach at 12 noon. Most notably, one of its top policymakers backed an immediate move to hike interest rates as the BoE pointed to a possible increase in interest rates early next year. The bank also forecast a slow pick-up in inflation from zero thanks to a strong pound, expecting inflation to be back on target in two years’ time.

The Pound fell sharply across the board as most economists expected two or even three members of the Monetary Policy Committee to vote for a rate hike. The surprise 8-1 result prompted markets to push out their bets on a first rate hike; with only Ian McCafferty voted against the majority.Earlier in the morning we did have British industrial output figures which unexpectedly eased in June as the production of oil and gas and mining fell due to weak demand from crisis-stricken Europe and a sharp strengthening of the pound.

The US again posted another strong jobs figure, with jobless claims hovering near the lowest levels in four decades, a sign the strong labour market will bolster growth. Firings are at historically low levels as employers hold on to more workers in response to increased demand following a slump in early 2015.  More hiring would help convince Federal Reserve policy makers that the economy can withstand an increase in the benchmark interest rate this year. As such, economists are forecasting the US to hike interest rates ahead of the BoE. 

Key Announcements:

13:30 – USD: Non-farm payrolls expected to fall slightly from 223K to 222K
13:30 – USD: Unemployment rate expected to remain unchanged at 5.3%