Intra-Day Market Moving News (GBP/USD)
07 May 2015 02:01GMT
Talk of rate rises may sound premature after the latest economic data. Britain's economic growth halved in the first quarter of 2015, and the BoE has said it expects inflation to fall below zero in the coming months.
However, the BoE focuses on where inflation is likely to be in two years' time, n prices could pick up if growth accelerates in the euro zone, oil prices rise n Britain's weak productivity fails to improve.
Markets have been repeatedly wrong footed by the BoE. Almost a year ago, it warned that they were underestimating the chance of a rate rise, causing a jump in sterling. Then oil prices tumbled, reducing pressure to fight off inflation.
Weak economic growth in Britain of just 0.3% in the first 3 months of 2015 has increased the chance that the BoE will trim its forecast for 2.9% growth this year but is less likely to hurt its identical growth forecast for 2016.
Economists also think the BoE may cut its forecast for annual wage growth of 3.5% late this year, after wage rises remained tepid in the early part of 2015.
While Britain's politicians are likely to be struggling to form a gov't next week, the BoE will look further ahead and consider whether markets are too relaxed about the prospect of higher interest rates.
The BoE is expected to keep rates at a record-low 0.5% -- their level for more than 6 years -- at its monthly meeting on Mon, according to every economist polled by Reuters this week.
But on Wednesday, BoE Governor Mark Carney may expand on a recent observation by the Bank that financial markets expected only an "exceptionally slow" pace of interest rate rises. That caused investors to bring forward their rate hike expectations.
Britain's election on Thursday looks unlikely to give one party a majority, and a gov't may not be in place by the time Carney presents a quarterly update of the BoE's forecasts.
In any case, it will be too soon for the BoE to reach a view on how any new economic policies might affect growth.
Recommended Content
Editors’ Picks
AUD/USD post moderate gains on solid US data, weak Aussie PMI
The Australian Dollar registered solid gains of 0.65% against the US Dollar on Thursday, courtesy of an upbeat market mood amid solid economic data from the United States. However, the Federal Reserve’s latest monetary policy decision is still weighing on the Greenback. The AUD/USD trades at 0.6567.
USD/JPY: Japanese Yen advances to nearly three-week high against USD ahead of US NFP
The Japanese Yen continues to draw support from speculated government intervention. The post-FOMC USD selling turns out to be another factor weighing on the USD/JPY pair. Investors now look forward to the crucial US NFP report for a fresh directional impetus.
Gold recoils on hawkish Fed moves, unfazed by dropping yields and softer US Dollar
Gold price clings to the $2,300 figure in the mid-North American session on Thursday amid an upbeat market sentiment, falling US Treasury yields, and a softer US Dollar. Traders are still digesting Wednesday’s Federal Reserve decision to hold rates unchanged.
High hopes rouse for TON coin with Pantera as its latest investor
Ton blockchain could see more growth in the coming months after investment firm Pantera Capital announced a recent investment in the Layer-one blockchain, as disclosed in a blog post on Thursday.
NFP: The ultimate litmus test for doves vs. hawks
US Nonfarm Payrolls will undoubtedly be the focal point of upcoming data releases. The estimated figure stands at 241k, notably lower than the robust 303k reported in the previous release and below all other readings recorded this year.