Market Brief: Key week ahead for both sides of the pond
30 Oct 2017
With plenty to digest this week, we begin at home with focus firmly on ‘Super’ Thursday where we expect the MPC to raise the Bank rate for the first time in over 10 years, by 25bps to 0.50%.
Today's data releases |
Key levels | |||
---|---|---|---|---|
Support | Resistance | |||
09:30 | UK consumer credit | GBP/USD | 1.3027 | 1.3340 |
12:30 | PCE inflation measures | GBP/EUR | 1.1140 | 1.1435 |
Market overview
We expect the MPC to raise the Bank rate for the first time in over 10 years this Thursday, by 25bps to 0.50%. Whilst caution could be argued over tightening policy during a period where household budgets are under pressure and corporate decision making may be sensitive to Brexit uncertainties, we suspect the committee will hint that rates may well need to rise further, albeit very gradually, to meet its 2% inflation target over the medium-term. In line with the rate decision, MPC voting pattern and the Governor’s press conference, we will also be treated to the quarterly Inflation Report, which should shed light on the BoE’s medium term expectations.
Sticking with monetary policy, the next FOMC announcement takes place on Wednesday evening which will likely yield an unchanged policy stance, but we will look for any read through towards December’s meeting. There are market whispers claiming that this will be preceded by the President’s announcement of his nomination for the Fed Chair. The latest reports indicate President Trump is leaning towards Fed Governor Jerome Powell to be Janet Yellen’s successor for the top seat. Seen as less hawkish than some of the other candidates, he seems the most likely option available to Trump to provide the highest degree of continuity to current policy.
Moving back to Europe, tensions in Spain escalated over the weekend after Catalonia’s regional parliament voted in favour of independence. Spain’s Senate promptly responded by implementing Article 155, allowing Spanish PM Rajoy to retake control of the region, where he has since named a new police chief, dissolved the Catalan Parliament and called new regional elections for 21 December. Madrid’s actions appear to have restored a degree of market confidence – Spanish stocks are rebounding this morning.
Sticking with monetary policy, the next FOMC announcement takes place on Wednesday evening which will likely yield an unchanged policy stance, but we will look for any read through towards December’s meeting. There are market whispers claiming that this will be preceded by the President’s announcement of his nomination for the Fed Chair. The latest reports indicate President Trump is leaning towards Fed Governor Jerome Powell to be Janet Yellen’s successor for the top seat. Seen as less hawkish than some of the other candidates, he seems the most likely option available to Trump to provide the highest degree of continuity to current policy.
Moving back to Europe, tensions in Spain escalated over the weekend after Catalonia’s regional parliament voted in favour of independence. Spain’s Senate promptly responded by implementing Article 155, allowing Spanish PM Rajoy to retake control of the region, where he has since named a new police chief, dissolved the Catalan Parliament and called new regional elections for 21 December. Madrid’s actions appear to have restored a degree of market confidence – Spanish stocks are rebounding this morning.