UK banking stress tests

Yesterday saw the BoE release the findings of is annual banking stress test which revealed that while RBS and Standard Chartered fell below the capital requirements that the Bank of England demands, they were able to pass the testing process after having adjusted their positions. We also saw an announcement that the BoE would be ‘ready to take action’ on the buy-to-let market with that segment being more susceptible to rate fluctuations, while there will also be another 3% added to UK stamp duty. In terms of data yesterday, we saw PMI (manufacturing) come in at 52.7 which is a drop of 3.00% from last month’s reading, but this had a negligible effect on the GBP’s trading.

On the mainland, EUR had a strong day when PMI from a hosts of countries came in higher than expected, including Spanish, German and Italian manufacturing. One of the positives of a weakened euro has been increased manufacturing/exports. We also saw the best unemployment level for 3 years come in at 10.7%. However, talk is still of a possible furthering of QE as the economy might need more prodding in the right direction. It’s also being seen as very important that Europe head in the right direction collectively and not at varying speeds as sometimes seems the case. If there does appear a ‘two speed’ to Europe’s recovery, whereby some countries lag behind while others lead, there could be another crises in the making for next year.

Across, the pond yesterday we saw one of the members of the FOMC make his thought known on the interest rate situation – that perhaps it might be a better idea to increase the rate next year possible as opposed to this. This was also on the back of poorer than expected manufacturing data, both of which had a negative impact on the dollar. This doesn’t, however, mean that the rate hike won’t be happening next month or that the FOMC member in question – Mr Evans – is completely against the hike happening this month.

There won’t be much data out today but tomorrow and Friday things are set to change with ADP employment data out, the Janet Yellen’s testimony on Friday to Congress.