A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
UK In Focus
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Richard Pontius Foreign Exchange Advisor
The U.K. is clearly the focus for today. The Bank of England’s Monetary Policy Committee (MPC) concluded its regularly scheduled meeting with an as expected, no change in policy. The nine-member committee is divided, especially when it comes to issues of inflation and spending. However, as has been the common theme among G-7 central banks, they remain committed to ensuring that the economy is solid. While noting that the economy is improving, the central bank confirmed that it won’t tighten monetary policy until there is clear evidence of a recovery. Regarding assessment of risk management considerations, the MPC said that it would “lean strongly against downside risks to the outlook.” Following the MPC announcement on policy, the pound sterling is lower from yesterday’s close against the dollar and, more notably, the euro.
In other economic news, the euro showed strength following Eurozone retail sales data that showed a larger-than-expected 2.7% rise during the month of March. As for the U.S., the major market event was the weekly release of initial jobless claims, which fell 92,000 for the first week of May to 498,000. Declines in initial jobless figures are encouraging and clearly on the right path. The data reflects substantially lower claims when compared with the monthly averages of 580,000 in April, 724,000 in March, 800,000 in February and 860,000 in January. Continuing claims, however, rose by 37,000 to 3.69million. Continuing claims fell by just 188,000 between March and April, but that paled in comparison to declines of 628,000 in March, 409,000 in February and 555,000 in January.
Tomorrow brings the all-important unemployment data from the U.S. Department of Labor. Nonfarm payrolls are expected to reflect sizable gains made during the month of April as the economy emerged from COVID-19-related restrictions. Analysts are calling for increases to nonfarm payrolls measuring between 850,000 and 1 million. The unemployment rate is expected to fall to 5.8% from March’s level of 6%. We expect the market to be fairly quiet today as participants await tomorrow’s jobs data.
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