Morning Update – 05/02/16 by Michela Jaccarini

Good morning!

 
Once again, as predicted, the Bank of England yesterday left interest rates unchanged at 0.5% with a vote of 9-0. Last November the bank predicted growth for 2016 to be at 2.5%, however the forecast was yesterday cut to 2.2%. The Committee also voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.

 
In December, CPI inflation stood at 0.2%, a figure far off from the Committee’s target of 2%. Over the past 3 months global growth has fallen and the US economy has grown by less than expected. Consumer confidence and overall investment intentions continue to be resilient.The committee members all agree that when the bank rates do eventually start to rise, they will do so in a more gradual and lower level to past cycles. Whether the bank will raise rates or not will depend on the economic circumstances.

 
Today all eyes will be on the US data related to Nonfarm payrolls which is expected to come in at 190K. A positive figure will signify a strong labour force and could reverse yesterday’s sell off in the dollar. A negative figure however could see further downside for the dollar. CAD employment figures and Ivey PMI are also released today. Positive US figures and negative CAD figures (or vice versa) could be a good combination for a trade.

 
Good luck!