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It was another good day for the British pound as odds of a Brexit deal seemed to improve and the BOE added one more kick higher. Risk-taking also lifted both the Aussie and Kiwi thanks to easing U.S.-China trade war jitters.

  • BOE voted unanimously to keep policy unchanged as expected
  • BOE Gov. Carney: “No deal” scenario unlikely but still preparing for it
  • U.S. preliminary non-farm productivity down from 3.0% to 2.2% in Q3
  • Q3 U.S. unit labor costs rebounded 1.2% from previous 1.0% slide
  • U.S. initial jobless claims at 214K vs. 213K forecast, 216K previous
  • Canadian final Markit manufacturing PMI down from 54.8 to 53.9
  • U.S. ISM manufacturing PMI down from 59.8 to 57.7
  • U.S. Challenger job cuts up 153.6% vs. 70.9% y/y in Oct
  • NFP report coming up

Major Events/Reports:

BOE Super Thursday

As expected, the BOE voted unanimously to keep interest rates and asset purchases unchanged during this week’s monetary policy huddle.

Even their Inflation Report contained high hopes that the Brexit transition will go smoothly, predicting that the economy could continue to expand by around 1.75% per year and that it would take three years for inflation to drop from current 2.4% levels.

Furthermore, policymakers assured that the U.K. economy is operating at full capacity, way sooner than they projected at late 2019. Keep in mind also that the latest set of estimates haven’t incorporated tax cuts as recently unveiled by Finance Minister Hammond, so there could still be some upside.

When asked how the central bank would respond to a “no deal” Brexit, Carney noted:

“Since the nature of EU withdrawal is not known at present, and its impact on the balance of demand, supply and the exchange rate cannot be determined in advance, the monetary policy response will not be automatic and could be in either direction.”

Sterling traders took these remarks in a positive light, mainly because “no deal” Brexit fears had been fading earlier in the day. As it turned out, newswires picked up on hints that the EU is ready to compromise on the Irish border backstop while some even mentioned that a financial services deal has been drafted.

Although officials from the U.K. and EU denied these rumors, with Barnier calling the reports “misleading” and Downing Street dismissing it as “speculative,” traders already seem to have turned their attention to Carney’s assurance that a “no deal” scenario is unlikely.

Mostly downbeat U.S. data

On the U.S. front, not all was fine and dandy as the latest batch of leading indicators came in weaker than expected. Chief among this is the ISM manufacturing PMI, which slid from 59.8 to 57.7 versus the estimated dip to 59.0.

Components of the October ISM report revealed that the declines were led by new orders and production while the employment sub-index also dipped from 58.8 to 56.8. The component for prices, on the other hand, climbed from 66.9 to 71.6 to signal stronger inflationary pressures.

It didn’t help that Markit’s version of the U.S. manufacturing PMI was revised down from 55.9 to 55.7 to reflect a slower pace of expansion than initially reported. This added to expectations that the upcoming NFP release might fall short of estimates, along with the jump in Challenger job cuts.

Risk-taking still in play

Wall Street was still in a cheery mood as downbeat U.S. data weighed on tightening expectations and the spotlight was on easing trade war concerns.

  • Dow 30 index closed 264.98 points up to 25,380.74 (+1.06%)
  • Nasdaq is up 128.16 points to 7,434.06 (+1.75%)
  • S&P 500 index is up 28.63 points to 2,470.37 (+1.05%)

U.S. President Trump continued to shore up optimism for his upcoming meeting with Chinese President Xi, tweeting:

This was even echoed by President Xi himself as he told Chinese state television CCTV:

“The two countries’ trade teams should strengthen contact and conduct consultations on issues of concern to both sides, and promote a plan that both can accept to reach a consensus on the China-U.S. trade issue.”

Major Market Mover(s):


Sterling sustained its positive run from the earlier trade session as BOE Super Thursday events highlighted the central bank’s confidence in the U.K. economy and the possibility of securing a Brexit transition deal.

Cable popped up to a high of 1.2998; GBP/JPY advanced to 146.83; EUR/GBP slipped to a low of .8760; GBP/CHF is up to 1.3028, and GBP/CAD rose to the 1.7000 levels.


This comdoll tandem was also in positive spirits for the most part of the day as investors looked forward to a productive meeting between Trump and Xi. Market watchers appear optimistic that commodities could rebound if trade issues are settled once and for all.

AUD/USD is up to .7203; AUD/JPY climbed to a high of 81.14; EUR/AUD tumbled to 1.5834, and AUD/CHF rallied to .7218. NZD/USD is up to .6645; NZD/JPY climbed to the 75.00 handle, and EUR/NZD retreated to 1.7160.

Watch Out For:

  • 1:30 am GMT: Australian retail sales m/m (another 0.3% uptick eyed)
  • 1:30 am GMT: Australia’s quarterly PPI (dip from 0.3% to 0.2% expected)
  • U.S. NFP report due later. Here’s what to expect.