Article / 16 June 2016 at 4:59 GMT

3 Numbers: Will the Bank of England weigh in on Brexit?

editor/analyst /
United States
  • The BoE won’t raise interest rate today but it may issue a warning about Brexit
  • US jobless claims are likely to rise but this continues to signal labour-market growth
  • US Housing Market Index to tick higher, breaking four months of no changes

By James Picerno

The Bank of England’s policy statement is in focus today and is sure to receive wide attention with next week’s Brexit vote looming. Later, two US releases will provide more context for assessing the mixed messages in economic data in recent weeks.

 The BoE is unlikely to raise rates today but will be trying to manage expectations
in light of next week's Brexit vote. Photo: iStock

UK: Bank of England Policy Announcement & Minutes (1100 GMT) Amid growing concerns that the UK may vote next week to leave the European Union, the Bank of England this week extended £2.5 billion to British lenders in an effort to smooth out any rough edges that are lurking on the other side of June 23.

Not surprisingly, given the macro jitters linked to the upcoming Brexit vote, the BoE is widely expected to leave interest rates unchanged today at 0.5%, which is the rate that’s prevailed since 2009. Some analysts also expect that the bank will repeat a previous warning that leaving the EU could trigger a recession in Britain. The potential for an economic downturn could also lead to higher inflation, in part because a Brexit-induced decline in the pound will raise consumer prices via higher import costs after currency translation.

The pound, in fact, has been weak this month, sliding to a two-month low against the US dollar earlier this week. Notably, the spring rally in GBPUSD has convincingly reversed in recent weeks. Downside momentum, as a result, appears to be accelerating.

Brexit worries aren’t helping. But one scenario that economists are considering could bring a reprieve for GBPUSD’s recent stumble. One school of thought says that Threadneedle Street may be forced to raise interest rates to soften renewed inflationary pressures if the UK exits the EU. In turn, GBPUSD could rally.

Unlikely? Maybe. Meantime, let’s see how – or if – the BoE tries to manage expectations today regarding Brexit.

US: Initial Jobless Claims (1230 GMT) The market will be looking to today’s update on jobless claims for more evidence that the surprisingly soft employment report for May was an outlier.

Recent numbers on new filings for unemployment benefits certainly look encouraging for expecting that payrolls will perk up in the summer. Claims fell to a six-week low in the first week of June. The previous 264,000 seasonally adjusted print is close to a four-decade low of 248,000 in mid-April.

Today’s report is expected to bounce to 270,000, based on’s consensus forecast, but that’s a low read in historical terms.

Some analysts say that the low number of claims lately isn’t as bullish as it appears because companies are having a hard time finding qualified candidates to fill open positions. As a result, there's growing reluctance to lay off workers. This is less about the economy vs. a tightening of supply and demand. In a separate report, the Labor Department last week reported that job openings rose in April to match the highest level since 2000, the start date for this data.

Even if that’s true, the crowd will continue to view claims that stick below the 300,000 mark as good news for the employment outlook and the economy generally. By that standard, today’s release is sure to please.

US: Housing Market Index (1400 GMT) Residential housing construction has been stuck in a narrow range in recent months. Sentiment among home builders echoes the trendless trend. The NAHB Housing Market Index has been holding at 58 for the four months through May.

NAHB’s chairman put a positive spin on the flat lining last month, pointing to firmer demand projections: "The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen."

Note, however, that Friday’s release of residential construction data is expected to tick lower for May. If so, the news will reaffirm the view that the housing sector is still treading water at best.

But could there be a glimmer of change on the horizon? Today’s sentiment data is on track to tick higher, rising slightly to 59 via’s consensus forecast. A fractionally firmer reading will promote the idea that housing’s in no imminent danger of a correction. But the forecast still implies that the sleepy housing market will remain drowsy for the foreseeable future.

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– Edited by Gayle Bryant

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


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