Daily Market Report 08/09/16

GBP

The Governor of the Bank of England yesterday was in front of the Treasury Select Committee and questioned over his move to expand the monetary policy. The Governor stuck to his guns and said he would have preferred to act quickly in the wake of the Brexit as opposed to wait for full economic slowdown before finding a solution. The meeting followed a bout of strong GBP data last week and earlier this week which Mr Carney sighted as a direct response to his action with the monetary policy and closed by saying there is still ‘room to cut’ creating speculation of a further potential rate cut.

Nevertheless, Sterling slipped on Wednesday after data showed British manufacturing output fell at the fastest pace in a year in July, in the immediate aftermath of Britain's vote to leave the European Union. Manufacturing output fell 0.9 percent on the month, a bigger fall than the 0.4 decline forecasted by economists. But overall industrial output unexpectedly rose thanks to strong oil and gas production, the Office for National Statistics said.

The data are the first official figures to cover output solely for the period after the June 23 Brexit vote. Britain was plunged into political chaos in the weeks after the referendum before the formation of a new government under Prime Minister Theresa May. With the political backdrop having stabilised somewhat, and with a run of upbeat data leading many investors take a more optimistic view of the British economy, sterling has rebounded around 5 percent against the dollar since hitting a three-decade low in July.

EUR

The Bank of Italy's liabilities towards other euro zone central banks rose to a new record high of 326.95 billion euros ($367.5 billion) in August, above levels seen four years ago at the height of the euro zone's debt crisis. Positions within the Target 2 system, which settles cross-border payments in the euro zone, are monitored because they can signal financial stress, for example when banks in a country lose foreign funding, however, seasonal factors such as the end of a quarter can also affect it. The Bank of Italy said in July the recent increase in its Target 2 position was driven by foreigners selling Italian assets, especially bonds, and Italians buying foreign assets, movements which were only partially offset by Italian banks raising more funds on international markets.

Key Announcements

12:45 – EUR : Minimum bid rate
13:30 – EUR : ECB Press Conference
13:30 – USD : Unemployment Claims; Forecast at 264k