• BOE rate decision rocks the pound
  •  EU economic outlook cut
  • Markets still digesting Yellen’s comments
  • Oil prices continue to hurt Canada

The big news this morning is the BOE rate decision and Carney’s following comment.  The interest rates and policy were left untouched, as was generally expected.  The vote on interest rates is what investors wanted to see, and only one person, Ian McCafferty, voted to raise interest rates.  Governor Carney said any rate hikes, whenever they might be, would be slow and gradual.  Taken together these pieces of information have a dovish tone, and point towards a rate hike being further away than hoped.  The pound has lost significant ground against most other currencies with the USD and the EUR being the biggest gainers on this news.

In other parts of Europe the news is just as disappointing, as the European Commission cut the economic outlook for the EU with reduced inflation and GDP growth projections for 2016.  The reports cited  continuing depressed oil prices and challenging global conditions as being factors in the revision.  The EU is still set for slow and gradual growth, however, as unemployment heads incrementally lower and a weak Euro helps manufacturing and exports.

The markets are continuing to digest Yellen’s comments from yesterday’s testimony that put a December rate hike back on the map.  Chances of a rate hike before the end of the year are now at 58% after having dropped to 25% as recently as October.  USD gained some ground yesterday on this news, but waits to see what the Nonfarm Payroll numbers are tomorrow morning.  If they are strong this will potentially push the dollar upwards, but if they come in weaker or as expected then the dollar will likely head downwards.

EURUSD: Euro is drifting lower this morning in light of the lowered economic outlook for 2016.

GBPUSD: The pound is down significantly against most currencies this morning on the tone of the BoE rate decision.  USD and EUR are up substantially against sterling.

AUDUSD: Aussie is stable this morning ahead of the monetary policy statement later today.

USDCAD: Canadian dollar is down this morning a bit on yesterday’s comments by the Fed’s Yellen and continuing low oil prices.  They will look to the unemployment tomorrow to see how CAD will end the week.