Pound Falls After BoE’s Dovish Hike

The Bank of England's dovish hike saw the pound ultimately head lower. Today, the US jobs report is the main focus.

Previous Day's Market Highlights

In a widely expected decision, the Bank of England voted to hike interest rates to 0.75%, the highest level since 2009. While markets had expected a divided vote, the decision was a unanimous one. This saw sterling rally initially, erasing some of its morning losses, but the gains proved limited and short-lived, and the pound fell during the press conference when Governor Carney was cautious on the pace of future hikes.
 
Sterling-euro saw swings within the 1.12-1.13 band while sterling-dollar briefly regained the 1.31 level before moving lower towards 1.30. Euro-dollar ultimately fell below 1.16.
 
The pound’s fluctuations kept it within recent ranges against the Aussie and the kiwi dollars, but it dropped to a new low against the Canadian dollar, falling below 1.70 for the first time since January. Elsewhere, Australian Retail Sales surprised to the upside, contributing to the Aussie’s gains overnight.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1232 1.1348 1.1163 1.61%
GBP/USD 1.3005 1.3363 1.2958 3.03%
EUR/USD 1.1578 1.1791 1.1575 1.83%
GBP/AUD 1.7667 1.7945 1.7569 2.10%
GBP/NZD 1.9337 1.9580 1.9198 1.95%
GBP/CAD 1.6940 1.7479 1.6927 3.16%

Today's Market Highlights

After yesterday’s rate hike excitement, it’s a quieter schedule for the pound today, although sterling traders will keep an eye on the July Services PMI (09:30 BST), forecast to drop from 55.1 to 54.7, which could put pressure on the pound.
 
In the afternoon, the main event is the US’s July jobs report (13:30). The Unemployment Rate is forecast to drop below 4.0% to 3.9%, while Average Hourly Earnings are forecast to have picked up month-on-month and NonFarm Payrolls to have increased a solid 190K. Overall, this could be a positive report and therefore strengthen the dollar. Wage growth is a particularly important figure, so there is a risk of dollar weakness should the figures disappoint.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Markit Services PMI (Jul) 54.7 55.1
1:30pm USD Unemployment Rate (Jul) 3.9% 4.0%
1:30pm USD NonFarm Payrolls (Jul) 190K 213K
1:30pm USD Average Hourly Earnings MoM (Jul) 0.3% 0.2%
1:30pm USD Average Hourly Earnings YoY (Jul) 2.7% 2.7%
1:30pm USD Trade Balance (Jun) $-46.5B $-43.1B
1:30pm CAD International Merchandise Trade (Jun) $-2.30B $-2.77B
2:45pm USD Markit Services PMI (Jul) 56.2 56.2
3:00pm USD ISM Non-Manufacturing PMI (Jul) 58.6 59.1

Caxton