Rational FX: All eyes on the BOE minutes due next week [19/01/2011]

Rational FX: All eyes on the BOE minutes due next week [19/01/2011]
With the CPI figure coming out at 3.7% yesterday, a considerable increase from the flat consensus of 3.3%, inflation takes centre stage surrounding GBP. All eyes will be on the BOE minutes coming out next week, with regards to the 6 / 1 / 1 split between members at the moment and the talk of a potential hike in interest rates. If we see more of the ‘6’ move towards increasing interest rates then this could see continued sterling strength. On the contrary if we see anything else then it will show that speculation surrounding the hike in interest rates is unfounded and we could GBP drop off somewhat.

Yesterday’s market movers

  • The only major activity in the UK yesterday was the CPI figure mentioned above.
  • In the Euro zone it was also a quite day with the only release of data coming at 10.00 with the release of the ZEW economic sentiment.  Coming out considerably higher than usual then we saw the Euro strengthen to an extent as this reflects a generally positive view of the Euro economy from investors.
  • The Net Long-term TIC flows was the sole piece of data reported from the US yesterday and came out almost double as was expected. This represents a very good in-flow of finances in the US, in connection to long term investments from abroad. This had little effect on the dollar as other influences such as the CPI figure from the UK had more influence in the market yesterday.

Today’s market movers

  • The 3 month average earnings from November is the first figure in the UK today. This is expected to come in flat which indicates that despite rises such as VAT, and increased inflation figures, the average consumer’s income has not risen in proportion, which could potentially see consumer confidence fall.
  • The 3 month ILO unemployment rate from November is also released in the UK today and is expected to come in flat, therefore decreasing the likelihood of having any major impact on the market.
  • In the Euro zone today the construction output figures are to be release at 10.00. An increase in these figures is often an indicator as to investments in this sector and thus has the potential to strengthen the EUR if a very high reading is seen.
  • In the US today there is a focus on the housing market with the MBA mortgage applications and the Housing starts MoM. With no consensus for the mortgage applications, the housing starts are expected to come in slightly lower, indicating a possible decline in the US housing market, although such declines are often seen seasonally around this period so construction of new houses is unlikely to be in its prime.
We wish you a very nice day.


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