In a bit of a surprise move yesterday, we saw the MPC reveal that 2 people had voted in favour of a rate increase for the first time in 3 years.
This initially saw GBP rise against all currencies, although these gains were relatively short lived. The 2 people who voted in favour of an increase were Martin Weale and Ian McCafferty, both of whom are external members of the MPC and suggests that it is still Mark Carney who holds the key as there are more members aligned to him than those willing to break rank. The reasoning behind the pro-hike votes was that the drop in unemployment and signs of a tighter labour market mean that wages could increase and this could all justify an immediate rate hike.
The reason that GBP gains didn’t last too long was that, later on in the day, we had the minutes from the Fed’s latest meeting. Although we don’t get to see exact voting patterns, we did see hints of a more aggressive stance among some members regarding a rate hike and this could happen sooner rather than later if unemployment keeps falling faster than expected. As well as strengthening USD, this will also please Mario Draghi as (by default) the Euro is weakening, something he hasn’t been able to do despite his best efforts.
Whilst we await with baited breath, Yellen’s speech at Jackson Hole which takes place at midnight, there is a great deal of data for the markets to digest. We have PMI from France, Germany and the Eurozone. Very important retail sales figures out of the UK. Consumer Confidence out of Europe. Jobless claims, PMI, home sales and the Philly Fed Manufacturing Survey out of the US.
Hold on to your hats!
Posted in Daily Market News on Aug 21 2014