Market News & Insights
3 November 2016

Mark Carney Takes Centre Stage

Today could help us set the tone for how the pound will trade in the coming weeks. Sterling has seen some demand in the past few days rising for a fifth consecutive day to see it set its longest run of gains against the dollar in almost two months. We have a few potential speed bumps for the pound today, starting with a court rule on whether Prime Minister Theresa May can trigger the U.K.’s exit from the European Union without a vote in parliament. May had previously stated that she intended to trigger Article 50 by the end of March which would begin a two year tug of war of negotiations with the EU, a worst case scenario from today’s ruling would be a delay in the process of these negotiations.

Following this court ruling which is scheduled for 10am, focus will turn to the BOE’s policy announcement. Mark Carney will have his job cut out for him here as he and his fellow BOE colleagues defend their action taken since the UK referendum. The headline numbers on the economic data front have held up well since the vote, despite the BOE’s more dire predictions. The call for further rate cuts by the BOE will surely also be questioned, particularly on the back of a report by the National Institute of Economic and Social Research which forecasts that inflation will rise sharply and peak at 3.9% in Q3 of next year.

The BOE aren’t the only central bank with economic policy issues. The Fed last night stated that the case for an increase in rates has “continued to strengthen” but decided for the time being, to wait for “some further evidence of continued progress”. While a December rate hike still seems the most likely with markets overnight increasing the probability for a hike to 72%, we can’t rule out the prospect of a delay here if the US elections go in favor of Trump. Tomorrow’s Non farms will also give us a better indication of how the US economy is set for a hike.

Today we have other economic data out from the UK in the form of Services PMI, the PMI figures have been very resilient since the June referendum. Then this afternoon we have the BOE inflation Report along with monetary policy decisions which are expected to remain unchanged. Finally then we have ISM Non-Manufacturing PMI and Factory orders for the US.