Headlines
BoE holds rates for 72nd month in a row
– QE unchanged since July 2012.
GBP/EUR hits fresh 7-yr high
– ECB’s Draghi suggests QE could last past Sep 2016.
US NFP report on tap
– US unemployment forecast to fall to 5.6%.
RBNZ comments weigh on ‘Kiwi’
– Rate cut fears send GBP/NZD higher by 230 pips.
Sterling
The Bank of England followed the script yesterday and left interest rates unchanged at 0.50% for the 72nd month in a row. Scandalously the UK central bank also maintained its asset purchasing target of £375 billion for the 32nd month in a row. The decision not to modify monetary policy was largely/entirely telegraphed by traders beforehand, and as such the Pound was not subject to any volatility following the announcement.
Later this morning the BoE is set to release a potentially more interesting announcement: its 12 month inflation forecast. If the projections point towards a consumer price index of 2.5%, as anticipated, then there is potential for Sterling to rally across the board as investors continue to price-in the probability that a swift surge in price pressures during the second half of this year will prompt the BoE to start raising interest rates at the beginning of 2016.
Euro
Whilst the Bank of England failed to move markets with its monetary policy announcement yesterday, the European Central Bank provided traders with much more food for thought.
ECB President Mario Draghi gave more details as to how the central bank’s recently announced quantitative easing scheme will take place; he christened it the Public Sector Purchase Programme (PSPP) and intimated that it will involve €60 billion worth of public and private sector securities each month.
However, it was Draghi’s comments on the duration of the scheme that most tickled traders’ minds, and the Euro sunk to yet another fresh seven-year low against the Pound when the ECB President suggested that the programme could extend past September 2016, which had previously been trumpeted as a potential end date.
US Dollar
The Pound to US Dollar exchange rate remained fairly sturdy yesterday as traders geared up for this afternoon’s crucial non-farm payroll report.
The highly regarded American labour market indicator is forecast to show that job creation decelerated slightly from 257,000 to 235,000 in February. However, the ‘Greenback’ is still liable to appreciate following the result because markets reckon it will be enough to bring the US unemployment rate down by one notch to 5.6%.
The initial jobless claims index underperformed analysts expectations yesterday, coming in at 320,000 compared to projections of 295,000, but the slight rise in benefit claimants is unlikely to have a material impact on this afternoon’s headline NFP report.
Canadian Dollar
Yesterday afternoon it was announced that the Canadian Ivey manufacturing PMI shrunk at a rate of 49.7 during February, which marked a sturdy improvement on the previous months’ score of 45.4. Nevertheless, the ‘Loonie’ weakened by around 70 pips against Sterling during the London session yesterday as traders locked in profit following the Canadian Dollar’s gigantic 230 pip gain on Wednesday afternoon.
Australian Dollar
Sterling rallied by around half a cent against the Australian Dollar yesterday as traders reinvested in the Pound following the Australian Dollar’s strong performance earlier in the week. GBP/AUD had depreciated by around two whole cents in reaction to the Reserve Bank of Australia’s decision not to slash interest rates again in March.
New Zealand Dollar
The New Zealand Dollar declined by around 230 pips against the Pound yesterday in reaction to an announcement from the Reserve Bank of New Zealand hinting that interest rates could begin to fall over the next few months.
Data Released Today
GBP BoE/GfK Inflation Next 12 Mths (FEB)
EUR Euro-Zone Gross Domestic Product s.a. (QoQ) (4Q P)
USD Change in Non-farm Payrolls (FEB)
USD Unemployment Rate (FEB)
CAD Building Permits (MoM) (JAN)