Spreadex Market Update
Super Thursday a bit soggy as hawkish votes fewer than expected
This was a bit of a shock for the pound, which had spent the morning waiting for a steroid-injection from the central bank, causing sterling to see notable losses against the euro and the dollar. The FTSE, on the other hand, received a bit of a boost, even if it couldn’t fully overcome the drag caused by the truly dreadful form of the mining sector as the day went on.
Things became a bit more complicated when you look beyond that headline-grabbing vote, however. The recent commodity woes have caused a soft short-term inflation outlook, with 0% expected for the next 2 months, but with the Bank forecasting that it should eventually reach (just over) 2% by the end of its 2 year target period.
Carney also commented that the UK is not in a ‘debt fuelled consumer recovery’, whilst clarifying his mid-July claim that rates would be raised around the turn of the year, stating it was his opinion alone, not that of the MPC as a whole. The pound probably could have done with that clarification a bit earlier than after the official bank rate votes were announced, but oh well. With the UK’s growth forecast also raised from 2.5% in May to 2.8%, the overall tone of this first Super Thursday was more hawkish than the vote suggested, but less gung-ho than many had predicted. Either way, Super Thursday didn’t really lead to the transparent clarity it was supposedly engineered to produce.
The dominance of the latest mining sell-off, and Super Thursday, meant that little other news could break through this afternoon. The only figure of note was the US jobless claims, coming in at a marginally better than expected 270k vs the 273k forecast, contributing to both the Dow’s weakness and the dollar’s (admittedly Bank of England-aided) strength. All of this could be rendered irrelevant, however, by tomorrow’s fairly crucial non-farm figure.
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