GBP
This year is  starting to look very similar to  2014 for
Bank of England Governor Mark Carney.  With the outlook dominated by a
weak euro-area economy that’s showing few signs of recovery, political risks at
home and inflation below the 2 percent target, the Monetary Policy Committee
left the benchmark interest rate at 0.5 percent yesterday. Investors see
borrowing costs staying at a record low for the rest of the year. 

GBP
This year is  starting to look very similar to  2014 for
Bank of England Governor Mark Carney.  With the outlook dominated by a
weak euro-area economy that’s showing few signs of recovery, political risks at
home and inflation below the 2 percent target, the Monetary Policy Committee
left the benchmark interest rate at 0.5 percent yesterday. Investors see
borrowing costs staying at a record low for the rest of the year. 

The mix of events is giving the nine-member panel little reason to end almost
six years of emergency stimulus. While improving wage growth may support the
case of two members who have argued in recent months that a rate increase is
needed now, the prospect of another year of weak inflation as oil prices tumble
is keeping them in the minority. 

Strains in the euro zone, Britain’s biggest trading partner, are holding back
an economy that is starting to feel the effects of tumbling oil prices. Consumer
prices rose an annual 1 percent in November, the least in more than a decade.

EUR
The Euro hit a fresh nine-year low against the dollar, in part after a surprise
decrease in German manufacturing. German factory orders fell by 2.4% in
November compared with the previous month, worse than expected. Increased
speculation about extra stimulus measures to combat Eurozone deflation also
played a part in the Euro’s decline.

If the European Central Bank moves to support the region’s economy with
quantitative easing, or buying government bonds, as the speculation suggests,
this pushes a rate rise even further into the future, making the Eurozone less
attractive for investors.

USD 
Yesterday fewer Americans filed for unemployment benefits last week as labour-market
tightening compelled employers to hold on to seasonal hires.  Jobless
claims decreased by 4,000 to 294,000 in the week ended Jan. 3. 

Employers finding it harder to fill vacancies are probably holding on to
workers hired during the holidays as the economy expands and consumers spending
picks up. The need to keep staff may mean companies will soon need to also
boost wages. 

Key
Announcements:
09:30 – GBP: UK Industrial Production
(Nov) YoY expected to fall from 1.6% to 1.1% 
13:30 – USD: US
Non Farm Payroll Employment (Dec) expected to be lower at 241K form
321K 
13:30 – USD: US unemployment rate (Dec)
 expected to fall from 5.7% to 5.8%

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