BOE Leaves Rates on Hold, 2 Out OF 9 Vote for Hike

The Bank of England Interest Rate Decision was as expected and left rates unchanged at 0.5%. The BOE Minutes, BOE Quarterly Inflation Report and the Monetary Policy Statement were released at the same time. BOE Asset Purchase Facility was left unchanged, as expected, at £435B. While no change in rate was expected, the tone and language used hinted that the Bank is gearing up to increase rates as early as May. The votes were 7 Hold v 2 Hike. The two dissenters sited widespread evidence of near-zero slack in the labour market and accelerating wage growth. GBPUSD opened at 1.41600 and spiked up to 1.42164, before reversing lower to 1.41277 as the rally was faded after this data was released.

US President Trump approved a list of tariff exempted countries including Member countries of the EU, Argentina, Australia, Brazil, Canada, Mexico and South Korea. These exemptions will last until May 1st, at which point current discussions on global excess capacity will be reviewed. The notable ally missing from the list is Japan. Canada and Mexico are on the list pending the conclusion of NAFTA negotiations.

German Markit Manufacturing PMI (Mar) was 58.4 v an expected 59.8, from 60.6 previously. Markit Services PMI (Mar) was 54.2 v an expected 55.0, from 55.3 previously. Markit PMI Composite (Mar) was 55.4 v an expected 57.0, from 57.6 prior. The slip in these data points suggests that the December reading was a short-term high. For Manufacturing, it was the highest reading since before the financial crisis and, for Services, it was the highest since June 2011. EURUSD fell from 1.23702 to 1.23511 following this data release.

Eurozone Markit Manufacturing PMI (Mar) was 56.6 v an expected 58.1, from 58.6 previously. Markit Services PMI (Mar) was 55.0 v an expected 56.0, from 56.2 previously. Markit PMI Composite (Mar) was 55.3 v an expected 56.7, from 57.1 prior. This data softened from highs in December. This puts growth on the back foot in the Eurozone and suggests a slowing in industry. EURUSD slipped further from 1.23593 to 1.23078 after the released data hit the headlines.

UK Retail Sales (YoY) (Feb) was 1.5% v an expected 1.3%, from 1.6% previously, which was revised down to 1.5%. Retail Sales (MoM) (Feb) was 0.8% v an expected 0.4%, against a prior 0.1%, which was revised down to -0.2%. Retail Sales Ex-Fuel (YoY) (Feb) was 1.1% v an expected 1.2%, from 1.5% previously, which was revised down to 1.3%. Retail Sales Ex-Fuel (MoM) (Feb) was 0.6% v an expected 0.4%, against a prior 0.1%, which was revised down to -0.2%. This data shows a pickup in retail sales in February but the softer revisions take the wind out of the sails somewhat. Combined with the December and January data it shows consumer spending declined over the three months, with bad weather playing its part. GBPUSD spiked to a high of 1.41799 before selling off to 1.41328 following this data release.

US Initial Jobless Claims (Mar 16) were 229K v an expected 225K, from 226K previously. Continuing Jobless Claims (Mar 9) were 1.828M v an expected 1.890M, from 1.879M previously, which was revised up to 1.885M. Jobless Claims data has been in a downtrend since the high after the financial crisis. It fell further yesterday, as job creation is sustained and more individuals resume work. Continuing Jobless claims was expected to tick up a little but showed a fall instead. USDJPY fell from 105.489 to 105.257, moved by this data.

US House Price Index (MoM) (Jan) was 0.8% v an expected 0.4%, from 0.3% previously, which was revised up to 0.4%. This data recovered after falling over the last few months, in what has become a seasonal move. Statistically, this reading is one of the worst for House prices in the US, as it represents the January data, but today’s data shows it is the best January since 2009. The YoY figure is reading at 7.3%, showing a strong US housing market.

US Markit Manufacturing PMI (Mar) was 55.7 v an expected 55.5, from 55.3 previously. Markit Services PMI (Mar) was 54.1 v an expected 55.8, from 55.9 previously. Markit PMI Composite (Mar) was 54.3 v an expected 55.7, from 55.8 prior. Manufacturing was expected to maintain its strong improvement since a low in May 2016 and is performing well. Services data is more of a worry and softened a little as expected. USDCAD moved higher, from 1.29012 up to 1.29258 as a result of this data.

BOC’s Wilkins gave a speech at the Rotman School of Management, in Toronto. Some of her comments were: there may be a case for taking longer to bring inflation back to target than usual. Six to eight quarters in some situations. A fine balancing between moving too quickly or too slowly on rates is needed. Moving too quickly on rates could have outsized effects, given high levels of household indebtedness but moving too slowly could allow more financial vulnerabilities to build. Interest rates are a blunt tool, difficult to use for financial stability goals. The BOC is concerned about cyber risk and the rapid pace of financial innovation.

Japanese National Consumer Price Index (YoY) (Feb) was 1.5% v an expected 1.7%, against a prior 1.4%. National Consumer Price Index Ex-Fresh Food (YoY) (Feb) was as expected at 1.0%, against a prior 0.9%. USDJPY sold off from 105.325 to 104.633 as a result of this data.

EURUSD is up 0.32% overnight, trading around 1.23402.

USDJPY is down -0.43% in early session trading at around 104.820.

GBPUSD is up 0.12% this morning, trading around 1.41140.

USDCAD is down -0.27% in early trade at around 1.29035.

Gold is up 1.07% in early morning trading at around $1,342.80.

WTI is up 1.28% this morning, trading around $65.02.