The BoE and FED Talk to Drive the GBP and USD

Daily Update - 8th February 2018

Yesterday’s Focus

• USD ADP Employment Change, FED’s William Dudley Speech, FOMC Member William Speech
• NZD RBNZ Monetary Policy Statement, Interest Rate Decision, Press Conference, Deputy Gov. Grant Spencer Speech

Yesterday’s Explained

On Tuesday, RBNZ left the Official Cash Rate unchanged at 1.75% today as widely expected. Kiwi tumbled as the central bank maintained a dovish stance.

Fed Williams Economy can clearly handle gradual hikes, he said yesterday that "the economy clearly can handle gradually rising interest rates." And, he's "not really worried about the downside risks of the economy slowing too much." Also, regarding recent market crash, Williams said " I don't see any of the movements in asset prices of late to fundamentally change my view of the economy." He reiterated his expectation for three or four interest rate hikes this year. Chicago Fed President Charles Evans said that rising wages and inflation expectations suggested that inflation might be on the up. And, "if we get to that point and have more confidence that inflation is moving up sustainably, then further rate increases would be warranted,"

German grand coalition reformed, German Chancellor Angela Merkel formally announced the reformation of grand coalition yesterday, after marathon negotiation with SPD. Merkel said in a press conference that the agreement would create "the good and stable government that our country needs and that many in the world expect from us". Martin Schulz will step down as SPD leader and enter the government as Foreign Minister. Schulz is known for his pro-EU stance and his push for turning EU into a "United States of Europe". Another SPD member Olaf Scholz will likely take up the job of Finance Minister. But some analysts noted that Scholz is in the liberal wing of SPD and he's not too different from Wolfgang Schaeuble.

Today’s Focus

• EUR Trade Balance, Economic Bulletin
• AUD RBA’s Gov. Philip Lowe Speech
• UK BoE Interest Rate Decision, Monetary Policy Summary, Quarterly Inflation Report, MPC Vote Hike, Minutes of Meeting
• US Jobless Claims, FOMC Member Harker & Kashkary Speech
• CAD BoC Wilkins Speech

Today’s Market

Today’s macro calendar for Europe also remains eventful, the German trade report on the cards ahead of the Bundesbank President Weidmann’s speech titled "Monetary Policy in the European Context" at the Monetary and Economic Policies on both sides of the Atlantic conference, in Frankfurt. Also, the speech by the RBA Governor Lowe will be closely eyed for fresh insights on the monetary policy outlook.

The big event for today remains the triple release from the Bank of England (BOE), coined as BOE’s ‘Super Thursday’. The BOE rate decision will be announced alongside the minutes release and quarterly inflation report (QIR). Rising price pressures combined with the appreciation in the pound likely to pose a double whammy to the BOE policymakers, leaving them to sit back on their rate hike plans until summer, the Canadian housing and US jobless claims data will be reported later today. Besides, the BOC Wilkin’s speech will also keep the traders busy ahead of Friday’s Canada’s jobs report.