The Bank of England rate cut was the big headline in the UK yesterday, the MPC vote was close with a cut narrowly winning 5-4, indicating an uncertain outlook, however many believe there will be another cut this year. Equity markets were muted following the announcement while Sterling dropped to a four-week low against the Dollar. Andrew Bailey noted, “this does not mean we should adjust our course with every data surprise that comes in,” adding that future rate decisions would be based on the “accumulation of evidence”. Markets will take this as a signal that the BoE will not be reacting to every surprise in inflation or wage data.
Overnight, the yen extended its rally into the fourth day, pushing the currency to around 149 per dollar. Aside from the Yen’s recent surge, renewed worries about the health of the world’s No. 1 economy also weighed on Japanese shares, the Topix index falling 6%, as the currency's rally weighed on Japan export-orientated economy. US jobless claims have risen to their highest level in a year, initial state unemployment claims totalled 249k in the week ending July 27, on a seasonally adjusted basis, above economists’ expectations of 236K claims and the highest level since August 2023.
US Treasuries extended a recent rally on Thursday following the data, which has increased optimism of interest rate cuts from the Federal Reserve. Yields on two-year Treasuries fell to 4.15%, their lowest since February and down from just below 5 per cent in late May, equity markets were initially boosted by the news. Meta’s share price jumped 8.8% after strong results, later falling slightly to end the day 4.8% up. Oil prices rallied again on Thursday on heightened tensions in the Middle East after Israel said it had killed one of the Hamas commanders responsible for the October 7th attack. Brent crude rose to $81.29 a barrel, having traded at a seven-week low of $78.43 on Tuesday. WTI rose to $78.32 a barrel. Data today, we have non-farm payrolls and US unemployment at 1:30pm, the surveys suggest 175k and 4.1% respectively.
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