UK interest rate off the cards, for now

With little data out of the UK yesterday, a speech by the BoE’s Kristen Forbes saw her comparing the UK’s labour market with that of the US’ – her final say being that the UK’s inflation situation is not conducive to an interest rate rise just yet. She also made mention of how the UK’s low unemployment rate, at present, is only hampered by low wage growth. With oil prices as low as they are at the moment, the upshot is that the Bank of England have more time to decide on when it’s right to raise interest rates. The data we did see from the UK yesterday included CBI manufacturing orders which revealed that manufacturers in the UK are struggling to find overseas buyers for their products due to the slowdown in global growth and low energy prices.

Regarding data today, we’ll see BoE Chief, Mark Carney, testify before the Treasury Committee where it is expected he’ll speak about the current ‘buy-to-let’ housing issue that’s affecting the UK property market.

To Europe where yesterday the ECB’s head honcho, Mario Draghi, stated the renewed need to boost inflation, considering the eurozone’s failure to hit its 2% target (currently at 0.2%). There is no deviation from the current policy of injecting €60Bn into the economy each month, and the main borrowing rate is still being held at 0.05%.

Aside from that, it was a reasonably positive day for the single currency as we saw it close higher against the dollar and pound. After Mark Carney’s speech this morning, we may see the rate test the 1.30 level after GBP/EUR opened at 1.32 at the start of the week.

Across the pond, the US will likely see a week of volatility if the Fed does/doesn’t acknowledge what’s occurring in the financial markets. Following the US interest rate rise last month, global oil prices have fallen by 12%, while the S&P has fallen by 7%.

With improvements being seen for the US economy, we’re probably not going to see any changes to policy. Employment still remains the US’ main concern, despite the slowing emerging economies, but the unemployment rate is holding steady and last month we saw non-farm payrolls exceed expectations. Come March, we’ll see the Fed offer more detail on forward guidance which markets look forward to. There won’t be much data out today aside from consumer confidence numbers this afternoon.