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Daily FX Update – 3rd November 2017

If GBP had remained elevated in anticipation of a Bank of England rate hike, yesterday’s 0.25 basis point increase to 0.5% was a clear case of buy the rumour, sell the fact. 

UK inflation accelerated to its highest level since April 2012 last month, printing 3.0%, a full 1% over target but the Bank of England’s signal that two more rate rises in the next 3 years should bring it back under control is hardly an advert for rates increasing rates at a sporadic pace, so perhaps now we’ll see macroeconomic fundamentals lead the way again. For me, GBP will remain under pressure in the short term as Brexit jitters and strength concerns will downplay any rallies.

In other news, Jerome Powell was elected as the next FED chair assuming he passes a Senate vote in February but this was widely expected and did little to alter the Dollar position, as did initial jobless claims that continue to support a strong labour market in the US. The true test of that however will come later today.

The UK remains in focus this morning with the release of services PMI data ahead of the main event of the day which takes us to the US with the non-farm payrolls. Following last month’s drop in payrolls for the first time in seven years, largely attributed to the hurricanes, expectations are for a strong rebound with a 300,000+ print expected. That coupled with yesterday’s releases and the Trump tax cut plans should ensure a volatile end of the week.

Have a great weekend.

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