Yesterday’s MPC meeting painted a very mixed picture. Although no changes to policy were expected and interest rates are to remain where they are; the Bank of England announced that it will slow down its weekly asset purchase programme, but insisted this “should not be interpreted as a change in the stance of the monetary policy”. While the MPC made efforts to downplay the tapering of the QE programme, this definitely looks like an effort to unwind the pandemic emergency measures. Sterling initially reacted well to the news and broke through the 1.39 level but then seemed to lose momentum, settling back in to the 1.38 range.
Outside of the BoE, the pound has also had a bout of negative news with Brexit tensions seeming to resurface with fisheries following a protest by French fisherman with concerns that their rights have been unfairly restricted. Furthermore, GBP also reacted to the polls opening for both local and regional elections. Naturally this also raises concerns around the Scottish elections and emergence of the pro-independence notion starting to gather more momentum. This subsequently highlights the potential for a Scottish referendum and the possible risks to the British economy.
Elsewhere, figures showed initial jobless claims in the US fell more than expected last week, dropping below 500k for the first time in a year. With the job market showing strong figures and the Fed last week painting a more positive outlook for the US economy, all eyes are going to be focused on today’s US employment data.
The non-farm payroll figure is expected to be printed at 990k against a previous of 916k with the unemployment rate expected to drop to 5.8% against a previous of 6.0%.
Have a great day.
Author: Joshua Nagenthiran, Senior Relationship Manager
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