US Tax Anticipation Drives the Dollar While BOE Prepare for the Super Thursday

Daily Update - 14th September 2017

Yesterday’s Focus

• UK Claimant Count Change, ILO, Unemployment Rate
• EUR Industrial Production
• US Producer Price Index, Monthly Budget Statement

Yesterday’s Explained

Sterling's rally lost some momentum after job data showed weaker than expected wage growth. Nonetheless, the Pound is still trading in firm tone as markets await today’s BoE rate decision. Dollar also weakens mildly after producer inflation data missed expectation.

Britain’s unemployment rate unexpectedly fell further to its lowest since 1975 during the three months to July, but wage growth proved even more subdued than expected, official figures showed on Wednesday. Eurozone industrial production rose 0.1% month over month in July, in line with the consensus forecast. The modest uptick over the month lifted the annual rate to a strong 3.2% year over year from 2.8% year over year in the previous month. On the other hand, the U.S. Dollar posted a solid gain against a basket of currencies on Wednesday after a report showed U.S. producer prices rebounded in August and as traders shifted their focus to consumer inflation data due on Thursday. Both producer and consumer inflation data will be important to the Federal Open Market Committee when it meets next week to discuss monetary policy.

Today’s Focus

• AUD Unemployment Rate
• EUR Consumer Price Index
• UK BOE Asset, Interest Rate Decision, Monetary Policy Summary, BOE Minutes, BOE MPC Vote
• US Initial Jobless Claims, Consumer Price Index

Today’s Market

It will be a big day on Thursday as it begins with Australia releasing its Unemployment Rate release by the Australian Bureau of Statistics is the number of unemployed workers divided by the total civilian labor force. The main event will be the Bank of England policy decision. The consensus is for the Bank to keep its policy unchanged via a 6-2 vote. At its latest meeting, when alongside the rate decision and the meeting minutes, the BoE published its quarterly Inflation Report, the Bank reiterated that policy may need to be tightened to a somewhat greater extent over the next 3 years than what was implied by market pricing at the time. Nevertheless, it signaled little urgency for a hike in the next months, while it revised lower its inflation and economic growth forecasts. In the US, we get CPI data for August. Given the increasingly concerned remarks on Wednesday by Brainard and Kashkari over inflation and interest rates, this set of CPI data is likely to attract more attention than usual, as it could prove critical on whether the FOMC will indeed proceed with another rate hike this year.