The pound fell substantially after the BoE decided not to raise interest rates, disappointing many who had expected a boost. The euro is currently the second weakest currency for the day. The yen and the Swiss franc, on the other hand, are rising sharply, aided by decreasing benchmark yields in Germany and the United Kingdom. The dollar is also strong as investors remain cautious ahead of tomorrow’s non-farm payroll report.
By a 7-2 vote today, the BoE kept the Bank Rate at 0.10 percent. Dave Ramsden and Michael Saunders, two well-known hawks, voted for a 0.25 percent increase. The MPC also agreed 6-3 to keep buying GBP 875 billion in government bonds. Catherine Mann, Dave Ramsden, and Michael Saunders voted for a GBP 20 billion drop in bond purchases.
In its forward guidance, the BoE stated that if incoming data, particularly on the labor market, is consistent with central projections in the Monetary Policy Report, it will be “necessary to increase Bank Rate in the coming months to return CPI inflation sustainably to the 2% target.”
Initial unemployment claims in the United States fell by -14k to 269k in the week ending October 30, beating expectations of 277k. It’s at its lowest since March 14, 2020. Initial claims fell -15k to 285k in the four-week moving average, the lowest since March 14, 2020. In the week ending October 23, continuing claims fell -134k to 2105k, the lowest level since March 14, 2020. The four-week moving average of ongoing claims fell by 156 thousand to 2357 thousand, the lowest level since March 21, 2020.
The US trade deficit increased to USD -80.9 billion in September, compared to an expectation of USD -74.5 billion. In the third quarter, non-farm productivity fell by -5.0 percent, compared to a forecast of -1.5 percent. Unit labor costs increased 8.3%, compared to a forecast of 5.2 percent. In September, Canada’s trade surplus was CAD 1.9 billion, well below the CAD 2.3 billion forecasts.
Governor of the Bank of Japan Haruhiko Kuroda met with new Japanese Prime Minister Fumio Kishida today to discuss Japan, global economies, and financial markets, according to a statement. Kuroda said he discussed the Bank of Japan’s monetary strategy to Kishida and restated the goal of achieving 2% inflation. When asked about the Fed’s tapering, he explained that the Bank of Japan is in a unique position compared to western central banks. Kuroda also stated that yield curve control will be maintained even after the pandemic has been contained.
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