BoE Pumps Pound; All Else Quiet

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BoE positive outlook
Weekly jobless on tap
Nikkei -0.4% Dax 0.03%
UST 10Y 0.53
Oil $42
Gold $2048/oz
BTCUSD $11738

Asia and the EU
GBP UK BoE on hold

North America Open
USD Weekly Jobless 8:30

Global markets were generally quiet in typical summer doldrums mood with stock index futures nearly flat while most of the currencies were moribund as well with the exception of the pound which rose more than 50 pips in the wake of hawkish BoE meeting.

The Bank of England held rates steady at zero and did not increase QE noting that some high-frequency data has shown a strong rebound including spending and the housing market. While BoE acknowledged that business investment remains lackluster and bankruptcies may yet increase in the wake of COVID impact, the MPC refrained from suggesting that negative rates may be coming and left policy unchanged for now.

The tone of the statement was a far cry from the nervous BoE communication in May when officials feared that COVID pandemic may result in long term recession and considered negative rates as part of the policy response. With economic picture improving and COVID infections in the UK seemingly under control UK monetary officials were much more sanguine in today’s communique and that helped fuel a rally in cable which inched towards the 1,3200 figure

In North America today the calendar is light with only US jobless claims on the docket. as markets focus on tomorrow’s NFPs and the ongoing talks in Washington DC. The pressure on officials to act continues to mount as the safety net of unemployment benefits has ended while labor demand remains tepid amidst very spotty reopenings for service businesses. Yesterday’s ADP data, for all its known modeling flaws does not bode well for tomorrow’s payroll number and if the data disappoints while DC shows no progress on talks, the hopium rally in the equity markets could quickly reverse on fears of much worse economic performance ahead.

Boris Schlossberg
Managing Director

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