Market Brief: Pound takes a hit
04 Aug 2017
Yesterday the MPC kept policy on hold, with Bank rate held at 0.25% and the level of QE at £435bn, as expected. The vote on interest rates was 6-2, with McCafferty and Saunders continuing to vote for a 25bp hike in rates; the vote in June was 5-3, but Kristin Forbes has since departed the committee.
Latest rates | Today's data release | ||||||
---|---|---|---|---|---|---|---|
GBP/USD | GBP/EUR | GBP/AUD | GBP/AUD | GBP/CHF | 13:00 | US non-farm payrolls | |
1.3159 | 1.1073 | 1.6491 | 1.6523 | 1.2736 | 13:30 | US unemployment rate | |
GBP/JPY | GBP/HKD | GBP/ZAR | EUR/USD | EUR/GBP | 13:30 | US trade balance | |
144.89 | 10.2878 | 17.5885 | 1.1884 | 0.9028 | |||
Investec currency forecasts as at 27 July 2017 | Key levels | ||||||
Q3 '17 | Q4 '17 | Q1 '18 | Q2 '18 | Support | Resistance | ||
GBP/USD |
1.29 | 1.30 | 1.30 | 1.31 | 1.3060 | 1.3175 | |
GBP/EUR | 1.13 | 1.14 | 1.13 | 1.13 | 1.1089 | 1.1110 |
Market overview
Yesterday the MPC kept policy on hold, with the Bank rate held at 0.25% and the level of QE at £435bn, as expected. The vote on interest rates was 6-2, with McCafferty and Saunders continuing to vote for a 25bp hike in rates; the vote in June was 5-3, but Kristin Forbes has since departed the committee. The vote to maintain the level of QE was unanimous at 8-0, whilst the other policy decision taken at yesterday’s meeting was to end the Term Funding Scheme drawdown period (TFS) in February 2018 as initially planned, rather than extend it. The vote on this was also a unanimous 8-0. The BoE August Inflation Report was published at the same time and if anything presented a slightly more dovish picture than in May, with the medium term growth, inflation and wage projections pushed down, leading markets and sterling in particular, to view the report in a dovish light. Note though that Governor Carney was keen to emphasise that it might be necessary to tighten more aggressively than the two 25 basis point hikes implied by the yield curve. The BoE appeared to be playing for time, pondering on some economic puzzles, before deciding in 2018 whether to raise rates.
The special counsel investigating claims of Russian election interference is reported to have empanelled a grand jury, implying the inquiry might be edging towards criminal charges, although grand juries are also used by prosecutors to issue subpoenas and get witness testimonies under oath. Reuters have reported that the jury has already issued subpoenas over the June 2016 meeting between Trump Jr, Jared Kushner and a Russian lawyer. Recall that in recent weeks President Trump has refused to rule out pardoning members of his family and friends in relation to this investigation. The S&P500 extended losses after the news that the investigation is not set to disappear anytime soon and indeed looks to be progressing; the index eventually ended the day 0.2% lower.
The special counsel investigating claims of Russian election interference is reported to have empanelled a grand jury, implying the inquiry might be edging towards criminal charges, although grand juries are also used by prosecutors to issue subpoenas and get witness testimonies under oath. Reuters have reported that the jury has already issued subpoenas over the June 2016 meeting between Trump Jr, Jared Kushner and a Russian lawyer. Recall that in recent weeks President Trump has refused to rule out pardoning members of his family and friends in relation to this investigation. The S&P500 extended losses after the news that the investigation is not set to disappear anytime soon and indeed looks to be progressing; the index eventually ended the day 0.2% lower.