Newsletter – 3rd August 2018

Morning Bulletin


  • The Bank of England’s monetary policy meeting was of course the main event this week and it didn’t disappoint. Whilst a rate rise was expected, BOE members voted unanimously 9-0 to raise rates by 0.25% which did take markets by surprise. Rates now stand at 0.75% following what was just the second rate rise in a decade. In their accompanying statement the BOE seemed relatively upbeat stating ‘were the economy to continue to develop broadly inline with its inflation report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate’.
  • Sterling initially rallied in FX space following the rate decision and accompanying statement, with GBP/EUR briefly spiking to a two and a half week high of 1.1292.
  • Those gains were however quickly eradicate and in fact Sterling currency pairs ended up suffering losses on the day following BOE Governor Mark Carney’s press conference.
  • There is a case that the decline followed as markets had long priced in a rate increase and so the buying of the Pound was an overreaction, but of course Brexit also remains the key driver and risk factor to the UK economy as acknowledged by the BOE.
  • UK Construction PMI smashed expectations yesterday morning, with the industry expanding at its fastest rate in 14 months. The Print of 55.8 far exceeded the 52.8 forecasted.
  • US Challenger Job Cuts y/y -4.2% (19.6% Previous)
  • US Unemployment Claims 218K (220K Exp)

  • EU Chief Brexit negotiator Michel Barnier has said the EU is ready to improve its offer on the Irish border. The border has been the main sticking point throughout the Brexit negotiations.
  • UK MP Theresa May is set for talks with French President Emmanuel Macron, with suggestions these talks could make or break the whole Brexit plan with Macron having the potential to influence a great deal of the other EU 27 member states.
  • Speaking this morning, BOE Governor Carney said the possibility of a no-deal Brexit is ‘uncomfortably high’ and ‘highly undesirable’, adding a transitional arrangement would be in the best interest of both the UK and the EU.
  • Australia Retail Sales m/m 0.4% (0.3% Exp)
  • China Caixin Services PMI 52.8 (53.7 Exp)
  • Swiss CPI m/m -0.2% (-0.3% Exp)
  • Services PMI rounds of the UK economic data for the week, due at 9.30am.
  • US Jobs data is in focus this afternoon, with a raft of measures and the headline Non-Farm print all due at 1.30pm.


Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1223 -0.10
GBP/USD 1.2992 -0.16
EUR/USD 1.1575 -0.07
AUD/USD 0.7356 -0.05


Time (GMT) Region Data Release Forecast Previous
09.00 EUR Final Services PMI 54.4 54.4
09.00 EUR Italian Industrial Production m/m 0.4% 0.7%
09.30 GBP Services PMI 54.7 55.1
10.00 EUR Eurozone Retail Sales m/m 0.4% 0.0%
13.30 CAD Trade Balance -2.3Bn -2.8Bn
13.30 USD Average Hourly Earnings m/m 0.3% 0.2%
13.30 USD Non-Farm Employment Change 191K 213K
13.30 USD Unemployment Rate 3.9% 4.0%
15.00 USD ISM Non-Manufacturing PMI 58.6 59.1