If you only looked at the main events for yesterday you would have been pretty disappointed. Nothing changed in that respect; the Bank of England and the European Central bank both left their base interest rates on hold at 0.5% and 1.0% respectively. The BOE decision is always accompanied by an eerie silence because they don’t comment unless they make a change but even the ECB press conference was a bit of a non-event. The ECB statement was barely changed from the previous month so there was little to glean from the news. The ECB is obviously treading a fine line between being upbeat but at the same time keeping cool heads. Whilst the Greece news is looking better by the day, the Eurozone really doesn’t need a strengthening Euro getting in the way of what will have to be an export led recovery.
The lack of information about the widely expected ‘no change’ announcement from the BOE is a little frustrating because what we want to see is whether anyone joined Andrew Sentence’s call for higher interest rates. That is unlikely but we do get the Bank of England’s inflation report next week so that will pretty well give us the items on the meeting’s agenda and the minutes from the meeting are published a week later so we don’t have to wait too long before we know what was discussed in detail.
The German factory orders data was surprisingly good and the Euro took some heart from that. It was also flattered by the weakness of the US Dollar ahead of today’s US employment report. The weekly new claims data which was released yesterday was oddly upbeat but I still think most analysts are expecting a poor non-farms payroll number and perhaps even a slight increase in the unemployment percentage. A poor employment report will add weight to the argument that the Federal Reserve is likely to increase the length breadth of depth of the Assets purchase program (QE) and that would be negative for the US Dollar.
I mentioned the Russian drought affecting wheat prices yesterday but the announcement that Russia is banning exports has really put the Siberian Tiger amongst the flamingos. Commodity prices across the board have moved; especially the foodstuffs but that is causing a general upturn in commodity markets of all shades. The main beneficiaries of these rises will be the Australian and New Zealand Dollars as well as the Canadian Dollar and perhaps the Norwegian Kronor. The losers in all this will be the large scale importers of such items and Britain, Europe and America rank high on that list. This may not be an overwhelming effect but it will be in the background for some time to come and the net effect on inflation in these areas will be felt over the coming year at least.
As well as the US employment data, today brings the UK producer price data as well as industrial and manufacturing production information. All is potentially market moving for the Pound so stand by for action. Sterling has had a good week as improving bank profits and nervousness in other currencies have kept tit at the very top of most of its trading ranges. I would guess that fact that the largely state owned RBS bank is back in profit does a lot for the potential sell off of the bank and perhaps even for the government making a profit on the investments that the taxpayers put in.
And then we get into the weekend with all that that brings. If you are heading off to the Edinburgh festival, have a great time but don’t mention the trams to your taxi driver and if you are off to the Chessington Sea Life Centre you will be interested to hear that the mermaid with the big boobies now has a bikini top to stop small boys (and bigger boys) dragging their heels as they pass. If you are just planning to mill around locally like me, then I hope you avoid at least some of the showers.