Global Themes

Sterling has rebounded off lows witnessed post the MPC’s vote split announcement at lunch time today. BoE Governor Carney’s inflation report was delivered with a very neutral tone, attempting to quash rumours surrounding when the interest rate tightening cycle will begin. The main points to take away from Carneys speech are as follows:

• Carney did not say rates would rise around the turn of the year in July’s speech
• We have seen growth in real labour income
• Sterling is working to keep inflation down
• Sterling’s persistent strength is having an impact on policy
• Sterling strength has not taken away the need for a rate rise
• This is not a debt fuelled consumer recovery
• Current account deficit is one of the top risks to financial stability
• The BoE will not sell QE assets until rates have been raised

GBP will continue to adjust its value, reflecting recent announcements.

USD

The Dollar skidded down an inch yesterday post an unexpected fall in ADP employment numbers, rising by only 185k versus forecasts of 215k. This is not a disaster given tomorrows all important non-farm payrolls report is expected to show the economy added 220k jobs in July. In wake of Fed Lockhart’s comments around impending data and a September interest rate hike, US ISM non-manufacturing data supported his cause, jumping by a whopping 60.3 vs 56.2. There are still plenty of reasons to remain bullish on the USD. Today however is a day for Britain, as markets will focus all their attention to Carney and surrounding data.

EUR

‘Up is better than down’ is probably the most suitable statement to describe Euro Zone service sector data yesterday. July’s composite index climbed to 53.9 v 53.7, still expanding at a pace that is commensurate with a growing economy. The EUR was a bit of a damp squib yesterday, reacting solely to US data and edging lower against the GBP as markets prepared themselves for today. We are tracking just above 1.09 against the dollar this morning, whilst GBPEUR hit a 3 week high yesterday, edging ever so closer to its 7 year peak.

AUD

Australian unemployment rose to 6.3 percent from 6.0 percent overnight, the highest level in more than 6 months. The participation rate did however increase, creating a headache for the RBA as they are under pressure to help stimulate the economy, whilst dealing with burgeoning house prices across the nation. The AUD only dipped slightly post the announcement, still tracking above 0.7300 v the dollar.

CAD

The Canadian Dollar continues to feel the brunt of ailing commodity markets, as Brent Crude Oil trades sub $50 this morning. USDCAD is sitting above 6 year highs at 1.3160, currently flirting near 11 year highs.  The Canadian economy isn’t explicitly underperforming, it’s more a case of soft Oil and a stronger US economy and is causing disparity. Interest rates remain at near record lows of 0.75 percent.