Beyond Currency

"The Bank of England’s Monetary Policy Committee meeting will end today with the most likely outcome a slightly more hawkish stance but no change to policy.

There are sure to be votes in favour of a rate hike given the most recent comments of some members of the committee, but they are unlikely to garner sufficient support to elicit a change in policy.

There is no question that the recovery of the economy from the Coronavirus Pandemic is now sufficiently strong for the withdrawal of support to be considered.

The Bank of England’s Monetary Policy Committee meeting will end today with the most likely outcome a slightly more hawkish stance but no change to policy.

However, with the Government withdrawing its furlough scheme completely from the end of this month, there is still sufficient doubt to ensure that a majority of MPC members will want to hang on for at least another month before they vote in favour of any change.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Accusations can be levelled at any group that is put together to mirror the outcomes of a government body that it is easy to be controversial or radical when there are no consequences.

However, the shadow MPC that is supported by the Times newspaper voted 9-0 in favour of ending QE early, with £50 billion of Treasury Bonds still to be purchased as part of the programme.

The committee, which is made up of well renowned economists and former members of the MPC, believes that ending support now would provide adequate notice for the beginning of rate increases that will be needed to keep inflation in check.

Accusations can be levelled at any group that is put together to mirror the outcomes of a government body that it is easy to be controversial or radical when there are no consequences.

Some members went as far as suggesting a 0.25% increase in rates immediately, as well as the end of QE.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"There is a distinct lack of clarity about why there is a global shortage of gas just as the Northern Hemisphere enters its highest demand period.

Last winter was unusually cold in Europe and Asia which increased demand and it seems that Russia has decreased supply leading to accusations of manipulation.

Alternative sources of energy such as wind power have also been suffering from meteorological issues.

There is a distinct lack of clarity about why there is a global shortage of gas just as the Northern Hemisphere enters its highest demand period.

The effect of a prolonged shortage of gas could have devastating consequences for the recovering economies of the Eurozone and the UK.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Bank of England’s Monetary Policy Committee will meet this week. It will be its first opportunity to discuss the economic recovery from the Coronavirus Pandemic since early August.

The committee has undergone something of a move towards a more hawkish stance with the introduction of a new external member in Catherine Mann and the arrival of Huw Pill as Chief Economist, replacing Andrew Haldane.

Haldane was expected to take up a new role as Chief Executive of the Royal Society of Arts, but it was announced at the weekend that he will be the Government’s new levelling up guru.

The Bank of England’s Monetary Policy Committee will meet this week. It will be its first opportunity to discuss the economic recovery from the Coronavirus Pandemic since early August.

Both Pill and Mann are on record as commenting that the Bank of England should begin to withdraw additional support for the economy sooner rather than later.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The recovery of the UK economy is waning slightly as the country faces several headwinds as its struggles to regain where it was pre-Covid.

The UK posted by far the fastest rate of recovery in G20 for Q2, growing at 4.8% in Q2 after a 1.6% contraction in Q1. The next fastest recovery was seen in Italy, which grew by 2.7%.

That rate of growth won’t be repeated in Q3, as the effect of the emergence from lockdown for several sectors of the economy will no longer be present.

The recovery of the UK economy is waning slightly as the country faces several headwinds as its struggles to regain where it was pre-Covid.

The hospitality and tourism sectors saw rates of growth well above the average but the inability to attract staff, which has led to shortages as well as difficulties in the logistics sector, have seen the recovery stutter.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Prime Minister Boris Johnson reshuffled his Cabinet yesterday, although two of the top three jobs remain unchanged.

Despite the suspected disagreement between Johnson and Chancellor Rishi Sunak, he retained his place to continue to drive forward the recovery while working to repair the gaping hole that has been ripped in the UK’s budget.

Often controversial Home Secretary Priti Patel also retained her role in the Cabinet, as Johnson tries to ensure that he is surrounded with colleagues with a reputation for getting the job done.

Prime Minister Boris Johnson reshuffled his Cabinet yesterday, although two of the top three jobs remain unchanged.

The other senior role, that of Foreign Secretary, has changed hands. Dominic Raab has been demoted and replaced by former International Trade Secretary Liz Truss. Raab moves to the Justice Department and becomes Deputy Prime Minister, a position on that has remained empty since 2015

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The recovery of the UK economy continues to be buffeted by the shortages created by the lack of HGV drivers and the global shortage of spare parts and raw materials.

Yesterday’s release of employment data for August showed that more people are finding jobs which brought down both the claimant count, by 58.6k and the unemployment rate from 4.7%in July to 4.6%.

This shows that the economy is still travelling in the right direction, but there is little doubt that the recovery will be weaker in Q3 than it was in Q2.

The recovery of the UK economy continues to be buffeted by the shortages created by the lack of HGV drivers and the global shortage of spare parts and raw materials.

Average earnings fell in August, both pre and post bo9nus. That is a sign that the inflation rate that will be released later this morning will also show prices have risen, but at a slower rate than previously.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The UK economy remains below the level it was before Coronavirus arrived.

The latest monthly data from NIESR show that the economy is still 2.1% smaller and the rate of growth slowed in July. The MoM rise in GDP in July over June was just 0.1%, versus a 1% rise in June.

The currency market is still being held within its recent ranges by expectations that Central Banks will begin to withdraw accommodation on one side, and disappointing data on the other.

The UK economy remains below the level it was before Coronavirus arrived.

The most recent data releases in the UK have not been sufficiently poor to drive the pound lower, and the release of employment and inflation this week will contribute to the overall mood of wait and see.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Andrew Bailey, the Governor of the Bank of England, believes that there are up to two million people who are eligible to find employment who, basically choose not to. In a speech yesterday, Bailey called upon those who are considering their options, to reconsider their choices and re-join the workforce at the earliest opportunity.

Coupled with the withdrawal of the furlough payment by Chancellor Rishi Sunak in the next few weeks, an overall lack of workers is beginning to hamper the recovery.

Bailey commented that the latest data he has seen for payments and mobility suggest that the recovery is levelling off and companies are becoming desperate for workers to fill vacant roles.

Andrew Bailey, the Governor of the Bank of England, believes that there are up to two million people who are eligible to find employment who, basically choose not to. In a speech yesterday, Bailey called upon those who are considering their options, to reconsider their choices and re-join the workforce at the earliest opportunity.

It may be that there is a game of cat and mouse developing where businesses are advertising opportunities, yet the workers who would generally fill those roles are holding out to see if there is a possibility of the rate for the role increasing given the advance being seen in inflation.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Prime Minister has again managed to carry his Party through little more than the force of his personality.

Johnson is in the fortunate position of having beaten the more senior members of the Conservative Party when he won his election as leader, he is not likely to be challenged (yet) by the upland coming generation that will likely take over when he calls it day.

The increase in National Insurance contributions that was announced a couple of days ago will pass through Parliament virtually unchallenged. This is despite the fact that there has been a 180-degree turn from both major political parties.

The Prime Minister has again managed to carry his Party through little more than the force of his personality.

The Conservatives, proud to be the Party of low taxation and austerity have raised taxes to fund services, and Labour the tax the rich Party, will vote against the Bill.

"

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.