Bank of England Adopts Hawkish Stance

Daily Analysis - 03/08/2018

Pound Slumps As Rate Hike Fails to Boost Investor Morale

The British Pound fell against the US Dollar after the Bank of England’s hawkish remarks failed to convince investors of a brighter outlook for the economy. In a surprisingly unanimous decision, the UK Central Bank’s Monetary Policy Committee lifted the benchmark interest rate by 25 basis points to 0.75% and signalled further “gradual” hikes. However, Sterling was unable to shake off its blues and slipped to its lowest since July 20th as investors questioned the rationale for tighter policy. With the economic outcome of the country’s complete exit from the European Union still embroiled in uncertainty, GBPUSD remains under pressure ahead of US payroll data.

US Crude Rebounds From 2-Week Lows On Technical Buying

US crude oil futures climbed on Thursday, reversing course after falling to their lowest level in close to two weeks. Contracts for September delivery rallied 1.90% to end the previous session at $68.98 a barrel. The recovery was largely driven by traders initiating long positions after US futures fell to their 100-day moving average of around $67.90 a barrel. Prices had tumbled earlier in the session after figures from the US Energy Information Administration released on Wednesday showed that crude oil inventories unexpectedly increased. Stockpiles rose by 3.80 million barrels last week to 409.00 million barrels. The consensus of analysts polled by the Wall Street Journal forecast an average weekly decline of 2.20 million barrels.

Mexico Holds Key Rate Steady

Mexico’s Central Bank left its benchmark interest rate unchanged on Thursday and trimmed its economic growth outlook for the year, as it vowed to maintain a “prudent” stance to counter inflation risks. In its first policy decision since national elections last month, the Banco de Mexico board kept borrowing costs unchanged at 7.75%, a move anticipated by 21 of the 26 economists surveyed by Bloomberg. In a statement accompanying the decision, policymakers said the economy would likely grow between 2.00% to 2.50% this year, compared to their previous guidance of between 2.00% and 3.00%. The Peso weakened following the announcement, falling -0.40% to 18.6570 per US dollar in late Thursday trade.

Copper Feels Trade War Heat

Copper prices declined for the fifth time in the past six trading sessions on Thursday as a flare-up in trade tensions between the United States and China overshadowed news of a union strike at BHP Billiton's Escondida mine in Chile. Metals investors fear that growing trade friction between the two biggest economies will put pressure on global growth and hurt industrial demand, making the strike at Escondida, the world's largest copper mine, a secondary concern for now. Copper futures for September delivery were last seen around $2.7300 a pound in Friday morning trade.