BoE MPC member Miles is leaving, who has made some waves recently by talking about the need for imminent hikes despite him being a known dove. Belgian Gertjan Vlieghe replaces him, who is also seen as leaning towards the dovish camp. Next week is Super Thursday, when more data will be released by the BoE than any central bank has ever done all in one go. Yesterday GDP was confirmed at 0.7%, good news for the UK and adds weight to the rate hike this year argument.
Stocks had a bit of a bounce yesterday, although it was on the back of five straight days of declines. Home ownership rates in the US has fallen to 63.4%, the lowest level since 1967 despite the record low cost of capital. Consumer Confidence came in at a ten-month low, which the Conference Board blamed on financial volatility in China and uncertainty in the labour market. Sentiment like this if sustained is the sort of thing that delays rate hikes, but this alone is unlikely to have a significant enough impact to embolden doves. There’s an almost zero chance of a hike from the Fed today, but it’s the last meeting before September when most analysts expect the first move, which is at odds with the market itself, which is pricing in an October hike. Assuming there is no move today, the statement itself will be the main market mover, as there’s nothing policy-wise officially due from the Fed between today’s announcement and September’s.
German Consumer Climate already released this morning came in as forecast and the single currency opens the European session largely unchanged. Goldman Sachs released a research note this morning suggesting that a declining oil price (that they expect to continue) will keep inflation below target levels and possibly even lead the ECB into further policy action (read: QE) – in that scenario a EURUSD rate of well below parity would be on the cards, and GBPEUR by extrapolation would hit levels well above 1.50 assuming GBPUSD holds up (which it likely would to a certain extent given rate hikes are just around the corner here in the UK).
The ruble has nearly erased all its 2015 gains, falling below 60 against the US dollar for the first time since March, dragged lower by the falling price in oil. The Russian central bank has slashed rates four times this year so far, but a continuation of recent falls in the ruble could interrupt the easing monetary policy cycle – if rates continue to fall alongside the ruble itself, expect some serious inflation.
Telegraph – Varoufakis faces criminal prosecution over clandestine ‘Plan B’ currency plot.
Independent – Barclays reports 25% rise in profits.
FT – BoE deputy warns on cutting regulation.
Pound Sterling (GBP), Euro Currency (EUR), US Dollar (USD) exchange rates commentary is provided by Argentex (Ag-Fx.com)