TV

Ole Hansen
While WTI crude has continued to be on the defensive, Brent has been trading upwards with potentially the best month since May 2009. Natural gas has also had two stories to tell this week - in the US it's fallen 9% while UK gas is up around 5%. Saxo's Ole Hansen looks at this week's divergence plus gold.
Article / 19 March 2014 at 6:16 GMT

3 Numbers To Watch: BoE Minutes, UK jobs, FOMC

editor/analyst / CapitalSpectator.com
United States

• Personnel changes at Bank of England
• UK jobs data update due
• Yellen today's star turn

Central banks will drive much of the macro news today, starting with the release of minutes for the Bank of England’s recent policy meeting. Later, Janet Yellen will preside at her first press conference on monetary matters as chairman. This follows  the publication of a Federal Open Market Committee (FOMC) statement and a new set of economic projections. We’ll also see an update on UK jobs data in today’s monthly labour market report.

Bank of England Monetary Policy Committee Minutes (09.30 GMT)The central bank yesterday announced the appointments of new deputy governors — personnel changes that some have labelled "a radical shake-up".  The  London Evening Standard newspaper described the news as "a major overhaul" of the bank's leadership.


workers The UK is seeing encouraging signs in the jobs market. Photo: Jeff J Mitchell / Getty


With a partially revised lineup of names for the Monetary Policy Committee (MPC), the market-moving potential is somewhat diminished for today’s release of the minutes from the last meeting. Suddenly, there's something new to focus on: how will the new appointees change policy, if at all? Nonetheless, the crowd will still pay close attention to today's transcript in search of any clue for how the Bank of England (BoE) plans to carry out policy at a time when the UK economy is showing considerable growth momentum while interest rates remain at record lows. "Everyone wants to know exactly when you're going to do something," BoE Governor Mark Carney recently told The Wall Street Journal. "We can't tell them something we don't know ourselves. We're not going to raise interest rates until the economy can really sustain it."

Carney has made it clear that he thinks there’s still too much slack in the UK, and so the probability of a rate hike is close to nil for the immediate future. As if to emphasise the point, the BoE last month announced that it would look to a range of indicators beyond the unemployment rate as a guide on the timing for tightening monetary policy. Some analysts have interpreted the change as a sign that the bank is planning on remaining dovish for longer than was previously expected. Maybe, although at the end of last month, the external MPC member Martin Weale advised that rates may rise sooner than some people think, if the labour market shows signs of pushing up inflation. For the moment, that’s not a risk. The annual rate of consumer price inflation is slightly below the BoE’s two percent target — the lowest pace in more than two years. If that’s about to change, we may see a clue in today’s monthly labour market update, which will be released simultaneously with the MPC minutes.

UK Labour Market Report (09.30 GMT)The UK is still on track to be the growth leader among the world’s developed market economies, according to a new Reuters poll. "The story on the UK remains very positive, with business surveys pointing to robust activity, confidence indicators bouncing strongly, credit growth strengthening and asset prices rising," says ING’s James Knightley.

At least one scientist thinks that positive momentum is set to spill over into the labour market in a more convincing degree in the form of higher real wages. The University of Glasgow economist Jo Armstrong predicts that the combination of employment growth and muted inflation will create conditions that will lead to increases in wages above the cost-of-living growth rate.

Last week’s monthly update of the Recruitment and Employment Confederation (REC)/KMPG Report On Jobs also points to improving conditions in the labour market. “This month’s figures show the second highest-ever results in permanent placements since Report on Jobs began in 1997,” says REC’s CEO Kevin Green. “The positive trend of rising vacancies continues and this is supported by our Jobs Outlook data on employers’ hiring intentions that shows businesses will be taking on more workers in 2014 as their confidence grows.”

Not surprisingly, the market is looking for another encouraging release in today’s official employment data. Although the consensus forecast sees unemployment unchanged at 7.2 percent, the claimant count — a key leading indicator— is expected to post another healthy decline of 25,000. That’s a slightly slower drop vs. the previous decrease of 27,600, but today's project fall is still strong enough to support the outlook for a robust recovery in Britain. There’s ongoing concern that growth is overly dependent on what some say is an overheating housing market. However, such worries will take a back seat for at least a day if today’s report tells us that the employment trend is continuing to improve.

 uk.labour.19mar2014
Source: UK Office for National Statistics

US Fed FOMC Announcement & Economic Projections (18.00 GMT)As part of today’s monetary policy announcement, the US Federal Reserve will update its quarterly economic projections. Today is also the chairman Janet Yellen’s first monetary policy press event, which will grab most of the attention. But don’t overlook the numbers, which may be quite revealing about the central bank’s intentions.

As usual, the first order of business with new Fed projections is comparing the estimates with the previous round of data. For instance, in the last batch of forecasts (released on Dec. 18, 2013) the bank made only slight changes to its 2014 GDP outlook by widening the estimate range to 2.8 percent to 3.2 percent from the previous 2.9 percent to 3.1 percent band.

It’ll be interesting to see if the Fed changes its assumptions on GDP and the other key indicators (unemployment and inflation) in today’s release now that the bank has said that it's committed to winding down its bond-buying programme. “We expect [Yellen] to reiterate the FOMC’s stance that the outlook remains positive once weather distortions dissipate, and that the hurdle to change the taper path remains high,” Bank of America Merrill Lynch’s US economist Michelle Meyer advised in a note to clients. However, if that outlook is headed for a revision, we’ll probably see the evidence for a change in the Fed’s assumptions via today’s projections. Keep in mind that the new forecasts will be published 30 minutes before Yellen’s press conference begins at 18.30 GMT.

us.fomc.19mar2014
Source: FederalReserve.com

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Investment Research
- Full disclaimer

Show latest activity
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail