BoE keeps rates on hold

The Bank of England kept interest rates unchanged at their policy meeting yesterday, leaving them for a second consecutive month at a 15-year high of 5.25%. There was a 6-3 split in favour of the hold, amongst committee members. Commentary continued to emphasize that the MPC expects rates to stay elevated for some time to come and that the committee stands ready to raise rates further if data surprises on the upside. The latest BoE forecasts highlighted the bank’s expectation that growth will be weak by historical standards, even as inflation remains more persistent than in previous forecasts. That said, headline inflation is expected to fall materially into October, primarily as a result of the reduction in the energy price cap. 

The central bank of Egypt also elected to keep interest rates unchanged at their monetary policy committee meeting. Consistent with the consensus expectation, the deposit rate will remain at 19.25%. Inflation stood at 38% y/y in the September print, in part driven by the impact of three currency devaluations since early 2022.

US initial jobless claims surprised on the upside, rising marginally in the week ending 28 October to 217k from 210k the week prior. There was a more material rise in the number of continuing claims for the week ending 21 October. Recurring claims for unemployment benefits rose sharply, increasing 35K to 1818K. The claims data adds to emerging signs, such as slower wage growth, of a slight moderation in the labour market. Nonfarm payroll data for October is due to be released later today.

US factory orders jumped 2.8% m/m in September, the biggest gain since January 2021. The print was above both expectations and the 1.0% rise seen the month prior. Orders excluding transportation rose 0.8% m/m.

The Caixin China services PMI rose marginally in the October print, to 50.4 from 50.2 in September. Expectations had been for a slightly larger uptick in the services component. The small uptick in services wasn’t enough to offset the fall in the manufacturing PMI, seen earlier in the week, leaving the composite measure down to 50.0 in October from 50.9 In September.

Today’s key economic data and events

• 11:00 TU CPI forecast (Oct): 62.5% y/y
• 11:45 FR industrial production (Sept) forecast: 0.0% m/m
• 14:00 EC unemployment rate (Sept) forecast: 6.4%
• 16:30 US nonfarm payrolls (Oct) forecast: 180k
• 18:00 US ISM services index (Oct) forecast: 53

Fixed Income

• Moves in US treasury yields were mixed on Thursday. On the short end, the 2yr yield gained 5bps to 4.9893%. In contrast, the 10yr yield fell 8bp to 4.659%, driven by some marginally weaker signs from the US labour market fueling speculation that the Fed funds rate is likely to have peaked.
• Bond yields across major European markets also fell on the day. The 10yr Gilt yield dropped 12bps to 4.3804% as the BoE elected to keep rates unchanged, and the 10yr German Bund yield declined 5bps to 2.715%.

FX

• The dollar fell against a basket of peers on Thursday. EURUSD gained 0.4%, to 1.0622, while GBPUSD rose 0.42% to 1.2203. USDJPY fell 0.33% to reach 150.45.
• Commodity currencies were again stronger against the dollar on Thursday. AUDUSD rose 0.64% to 0.6434 and NZDUSD jumped 0.9% to 0.5899, while USDCAD fell 0.8% to 1.3739.    

Equities

• US Equity markets continued their rally on Thursday. The Dow Jones gained 1.7%, the S&P 500 rose 1.89% and the Nasdaq increased 1.78% on the day.
• Gains were also seen across major European equity indices, on the back of this weeks’ central bank decisions to hold rates unchanged. The Eurostoxx 50 gained 1.9%, the DAX rose 1.5% and the CAC 40 increased 1.9%. The FTSE 100 jumped 1.4%.
• Locally, the DFMGI gained 0.5% while the ADGI rose 0.6%.
  
  

Commodities

• There were gains in both Brent and WTI on Thursday. Brent rose 2.6% to USD 86.85/b and WTI gained 2.5% to end at USD 82.46/b.