Hi there james here
another good day again over 200 pips in the euro session including a news trade
Dollar is firmer across the board in early US session after upside surprise in Nov's private employment report which showed 189k job growth in US. The number, which is usually used as a preview to Non-Farm Payroll, suggest that the NFP could also surprise on the upside and reach 200k level. However, the Challenger report told another story indicating that number of workers affected by job cuts in Nov increased 16% to 73k. Other data from US saw Q3 productivity rose more than expected by 6.9% but labor costs dropped sharply by -2.0%. ISM non-manufacturing index and Factory orders will be featured next.
Quick update: ISM non-manufacturing index droppde more than expected to 54.1 in Nov. Price paid surged from 63.5 to 76.5. Employment component eased to 50.8 but remained above 50. Dollar remains firm after the release.
Sterling tumbles across the board today on the back on increased speculation for a rate cut from BoE tomorrow after weak economic data. U.K. house price growth, as measured by Halifax, continued to soften in Nov slipping to a fresh low of 6.3% yoy rate, slowest pace in four years . PMI Services dropped sharply from 53.1 to 51.9 in Nov. Data from Eurozone was mixed. Germany PMI services dipped more than expected to 53.1 in Nov but Eurozone PMI service improved from 53.7 to 54.1. Oct retail sales was a disappointment, dropping -0.7% mom, dragging yoy rate sharply down from 1.6% to 0.2%.
On Wednesday and Thursday this week, the Bank of England (BoE) will hold a monetarypolicy meeting followed by an announcement on Thursday Usually, the decision made at the meeting is not commented on immediately after the announcement. Therefore market participants will probably have to wait until the release of the minutes on 19 December to learn on what basis the decision was made and how individual members voted.
According to the minutes of the latest meeting, the BoE found at the time that there was considerable uncertainty about the prospects of inflation and economic activity.
Moreover, we note that critics have argued lately that the BoE was too slow to react earlier, and that interest rates should be lowered now to ensure that interest rates do not lag developments in the market and that the economy does not suffer.
So far the economic indicators show no evidence of the turbulence in the financial markets having affected the economy to any appreciable degree. We therefore expect the BoE to leave interest rates unchanged at 5.75% at the next meeting, but we expect that the anticipated lower activity from the fourth quarter of 2007 will result in interest-rate cuts in February and August 2008.
It is worth noting that market participants are divided over whether the BoE is going to lower interest rates this week or not. The market has long discounted a fifty-fifty chance of an interest- rate cut of 0.25 percentage point, but in view of today's release of weak PMI Service data and the softer data about the house market, the likelihood has risen to 60%. A little further ahead, market consensus and our expectations about the BoE's interest rate coincide. The current market rates reflect the expectation that interest rates are 0.50 percentage point lower by September 2008.
James
|
Linear Mode
