What you need to know before markets open:
• Bank of England delivered extra dovish rate hike saying future moves are limited and very gradual.
• US stocks and the US Dollar fell after details of the Republican tax cut plan were revealed.
• US President Trump nominated Jerome Powell for Federal Reserve chairman.
• The US October labor market report is in market focus with the private forerunner ADP labor market survey beating the forecast by 17.5% on the upside. (historical correlation is charted)
Friday’s market moving events
• Caixin services PMI for October rose to 51.2 in October, picking up from September’s 21-month low, but was modest overall and remained weaker than the historical average.
• The UK services PMI is set to decrease 53.3 in October.
• The US NFP report is expected to see 312K new jobs added in the US economy in October after falling by 33K in September. The unemployment rate is seen steady at 4.2%.
• Canadian unemployment rate is expected to remain steady at 6.2% in October with employment rising 15K.
• US ISM in non-manufacturing is expected to decelerate to 58.5 in October.
• Minneapolis Fed President Neel Kashkari is scheduled to participate in moderated Q&A with Women in Housing and Finance, in Washington DC at 16:15 GMT.
• ECB’s executive board member Benoit Cœuré participates in a panel discussion "Economic Forum: The Global Financial Cycle – Causes, Consequences, and Policy Responses" in Washington DC at 20:15 GMT.
Major forex market movers
• Sterling fell 200 pips to below $1.3100 with Bank of England delivering extra dovish rate hike.
• Markets showed a little-to-no reaction to President Trump’s nomination of Jerome Powell to lead the Federal Reserve but reacted negatively to details of Republican tax cut plan.
• US labor market report is in focus as Fed is on its way to Deliver rake hike in December.
• Canada’s labor market and international trade balance are to test CAD’s resilience at C$1.2900 level.
Thursday’s macro summary
• Italian manufacturing PMI rose to 57.8, up from 56.3 in September indicating strong growth of the sector.
• French manufacturing PMI posted 56.1 in October, unchanged from September and the highest since April 2011.
• German manufacturing PMI reached 60.6, unchanged from September’s 77-month high.
• Eurozone manufacturing PMI rose to 58.5, reaching the 80-month high in October.
• German unemployment rate fell to 5.5% in September, the lowest level since November 1990.
• The UK construction PMI rose to 50.8 in October, but optimism falls to lowest in almost five years.
• The Bank of England hiked the Bank rate to 0.50% in line with expectations but cut the outlook for further policy normalization indicating only two 25 basis points rate hikes for next three years.
• US labor productivity rose 3.0%q/q in Q3 2017 after rising merely 1.5% q/q in Q2.
• Republicans are expected to unveil a tax reform plan Thursday that would permanently lower the corporate tax rate to 20%.
• Details of the Republican plan to cut taxes revealed that the deduction of mortgage debt for newly purchased homes will be halved to $500,000, hitting the construction industry and affecting US Dollar negatively.
• Fed Governor Jerome Powell spoke in a panel discussion focusing on LIBOR transformation; no monetary policy issues were discussed.
• ECB's Weidmann said the ECB board members agree that an accommodating monetary policy remains necessary, but ECB ready to act should US monetary tightening have an impact on price formation in the Eurozone. Weidmann also noted that Catalonia crisis could have an impact on Spain's economic outlook.
• The US President Trump officially appointed Jerome Powell for Fed chairman after Janet Yellen’s term ends on February 2, 2018. Yellen said she is committed to working with Powell to ensure a smooth transition.
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