Daily Alert: Friday 4th August 2017

Mark NugentAug 2017, Daily Alert

Forex Analysis for Friday 4th August 2017

Economic Calendar

GBP Services PMI came in on target (53.8 vs 53.6).

BoE Super Thursday:

Interest rates kept unchanged at 0.25% by an expected 2-0-5 vote (3-0-5 last time).

Asset Purchase Facility (QE) also unchanged by a unanimous vote (0-0-8).

BoE August Quarterly Inflation Report (QIR) Summary:

Forecasts:

Growth: 2017: 1.7% (Prev. 1.9%), 2018: 1.6% (Prev. 1.7%), 2019: 1.8% (Prev. 1.8%)

Inflation: 2017 Q3: 2.7% (Prev. 2.6%), 2018 Q3: 2.6% (Prev. 2.6%), 2019 Q3: 2.2% (Prev. 2.2%), 2020 Q3 2.2%

Average Weekly Earnings: 2017: 2.0% (Prev. 2.0%), 2018: 3.0% (Prev. 3.5%), 2019: 3.25% (Prev. 3.75%)

Unemployment: 2017 Q3: 4.4% (Prev. 4.7%), 2018 Q3: 4.5% (Prev. 4.7%), 2019 Q3: 4.5% (Prev. 4.6%), 2020 Q3 4.4%

*Above forecasts are based on the APF stocks, corporate bond stocks and TFS remaining at their current levels over the forecast period. Furthermore, market implied expectations suggest two rate hikes over the forecast period compared to just one seen in the May report with the first of those at around Q3 2018 (May exp. Was Q4 2018).

Key Judgements

1: Significant upward pressure on inflation from import prices eases only in H2 of the forecast period

2: As the remaining slack in the economy is absorbed, domestic price pressures gradually increase

3: Consumption grows at a subdued pace, broadly in line with households’ real incomes

4: Global growth remains strong, supporting UK net trade and investment in the face of continued uncertainty around Brexit

RBA Monetary Policy Statement: recent AUD rise had a modest effect on GDP and inflation forecast and that further strength in the currency would reduce economic growth and inflation. RBA also maintained its inflation forecast through to 2019, but lowered its GDP forecast for 2017 by 50bps to between 2.0%-3.0% from 2.5%-3.5%. (Newswires)

US Special Counsel Mueller impanelled a Washington grand jury in the Russia probe, which suggested the investigation is intensified rather than cooled down. (Newswires)

Market Reaction

There is consolidation everywhere: in equities, oil and gold. US 10 Year yields drop yesterday and are down on the week. The USD barely moves; the EUR grinds upwards; the JPY strengthens; the GBP drops on the decreasing likelihood of a rate hike; commodity currencies hardly move.

News Media

Grand Jury impanelled on Trump/Russia allegations

Today’s Calendar

USD Average Hourly Earnings and Non-Farm Employment Change

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