BoE and US Retail Sales in Focus

It’s been a quiet start to the day in financial markets but things are likely to pick up considerably, with the Bank of England interest rate decision and minutes due and a raft of data to come from the US.

The retail sales report this morning provided further evidence that the UK economy is coping well in the immediate aftermath of Brexit, something the BoE will likely take into consideration when deciding whether to ease monetary policy again this year. The central bank announced a large package of stimulus measures at the last meeting after initial survey data suggested the UK economy was in for a very rough ride. Surveys have since recovered and other data points have been better than expected, giving the BoE some leeway before it has to ease again.

While no further stimulus is expected to be announced at today’s meeting, traders will be looking for clues in the minutes about the possibility of more this year. The BoE previously claimed that another rate cut will follow this year if the economy performs in line with expectations, the question now is whether the economy has performed better or not. Should we see any votes for another rate cut or the minutes suggest one remains likely, it could weigh on the pound which has recovered some of the ground lost since the referendum. The FTSE will also be sensitive to the release, with the weakness in the pound having provided a boost to it over the last couple of months. Traders will also be looking for hints that more bond buying will be announced to offset any weakness in the economy that is likely to follow.

U.S Data to Influence Fed Hike Chances

There is also a large amount of economic data to come from the US today, including the August retail sales report, manufacturing data for September, inflation figures and jobless claims. The data is unlikely to influence the outcome of next week’s Fed decision at this stage but it could affect whether they move in December. Retail sales are a huge part of the US economy and while three of the last four months have been very good, the rest of the year has been quite disappointing. Some policy makers, including Lael Brainard, have suggested they want to see more evidence that spending will remain strong before voting for a hike which makes today’s data increasingly important.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.