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02 Aug 2017
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Super Thursday arrives

US Dollar

Expected Range 1.3200 – 1.3300

The US dollar was hampered yesterday as ADP figures missed the mark and released weaker than expected, further damaging the chances of a US interest rate hike later in the year. July’s figures showed an increase of around 178k versus an expected 190k, which does not bode well for tomorrow’s non-farm payroll numbers. The figures for June were also revised sharply lower to 158k from 191k which sent EUR/USD soaring, nearly touching 1.19 (IB). There were also comments from three non-voting Fed members yesterday; Bullard, Mester and Williams. The comments were broadly mixed and did not provide any momentum for the US dollar. We will have to wait for today’s unemployment claims and tomorrow’s all-important NFP to see whether the dollar can regain some losses through a positive number in employment. Coupled with this, Federal Reserve member James Bullard was particularly downbeat about the rate of US inflation and aired his concerns about raising interest rates too early.

Today’s biggest news and arguably the week’s biggest event is here in the form of the Bank of England’s interest rate decision, policy statement and quarterly inflation report. At the last meeting in June, the market was stunned as three dissenting members decided it was time to vote to an interest rate hike, given the rise in inflation and the resilience of the economy following Brexit. With one of the ‘for’ voting members now replaced, it will be interesting to see how her replacement, Professor Silvana Tenreyro votes, however she is likely to vote with the majority at her first meeting.

Whist the market broadly expects rates to remain the same, there are definitely strong arguments that the Bank of England could raise their interest rates now or in the near future. Firstly, UK growth is broadly on track at around 1.5%. Secondly, a 0.25% hike in the rates is still relatively small and this early rise would provide capacity in case there was a need for a reversal further down the line. And finally, the Bank of England may want to reign in the unsecured credit lending that has reached £200bn for the first time since 2008.

Euro

Expected Range 1.1110 – 1.1205

It was a quiet day for the Eurozone yesterday with only the release of PPI for June to interest analysists. Against the pound, the euro has consolidated around GBP/EUR 1.11 (IB) and Wednesday was not any different. The Eurozone is continuing to go from strength to strength, however depending on the Bank of England’s vote today and more importantly the sentiment of their statement afterwards, GBP/EUR could break out of this trading range. There is considerably more data from the Eurozone today, most significantly EUR retail sales as well as German services PMI numbers. 

Australian Dollar

Expected Range 1.6420 – 1.6620

The Aussie dollar suffered overnight and is down around 0.5% against GBP this morning as trade balance data missed expectations. The country’s surplus dropped to AUD865m however the market had thought the figure would be double this amount. The Aussie dollar’s woes were compounded by the fact that May’s surplus was also revised lower. Reading between the lines, the increase in imports are a signal that the economy is gathering pace. 

New Zealand Dollar

Expected Range 1.7680 – 1.7900

It has been a bad 24 hours for the New Zealand dollar as well as it has lost over 1.5% since the start of the month. Commodity prices slipped for last month overnight and GBP/NZD has opened above 1.78 (IB).