PMI last shred of economic data ahead of tomorrow’s BoE

UK economic activity has been patchy at best over the past month or so: GDP growth exceeded market expectations but remained well below that of the Eurozone, the services sector remains resilient yet the construction sector has fallen into recession, inflation is expected to slow in the coming months and yet real wage growth remains negative. Against this backdrop, Mark Carney’s Monetary Policy Committee has to decide whether to raise interest rates for the first time in over a decade – an unenviable task.

This morning’s manufacturing PMI will add some more information on current sentiment within businesses and how the stuttering and stagnating Brexit negotiations are hindering (or aren’t…) business activity. The figures are due at 0930GMT ahead of a speech from the Bank of England’s John Cunliffe. Given the proximity to tomorrow’s rate decision he’s unlikely to comment directly on policy but that won’t stop markets clinging on to every word in order to glean any information not currently priced into the pound.

Our Chief Economist Jeremy Cook’s webinar previewing the Bank of England decision kicks off at 1030GMT tomorrow. Sign up here.

FOMC seen keeping the powder dry ahead of December

Ahead of Mark Carney and Co thought, is this evening’s Federal Reserve rate decision. Given the healthy growth in US stock markets and the comfortable absorption of the Fed’s policy plans into US treasury markets, it’s unlikely the FOMC will want to upset the apple cart at this point in time. With GDP, labour market and inflation figures in the US still clouded by one-off effects from the Atlantic hurricane season, it’s also too soon for the board to reconsider their assumptions for the current state of the US economy. Once today’s rate decision is out of the way, the market can remain fully focused on December as the next ‘live’ meeting for a rate hike.

The policy statement is due at 1800GMT.

Elsewhere in the US, as the administration is craving for some political good news after the indictments on Monday, plans to reveal the tax reform today have been delayed. There was always concern that tension between the House and the Senate would result in some sort of compromise, but it was believed that an agreement would have been reached by now. Nonetheless, we now look to Thursday as a bumper day for the US economy with not just tax plans now due to be released, but also an announcement on who will take up the Fed chair position after Janet Yellen departs in February. The money’s still on current Fed governor Powell, but both these decisions could be easily delayed again.

NZD finally granted some reprieve

The Kiwi dollar was granted some reprieve overnight as jobs figures crushed expectations. The unemployment rate dropped by 0.2ppts to 4.6%, the lowest level of unemployment since 2008. While wage pressures remain subdued and political risk is on the radar, the RBNZ will still have their hands tied over monetary policy, but the NZD’s managed to claw back just over 1% over the past few hours. However, putting the move into context shows just how much the NZD’s been marked down recently: it’s still down 4% since the beginning of October.

Have a great day.