JPY Machine Tools improve from August
UK BOE hawkish but claimant count rises
EUR German Institute ups 2006 growth to 2.3% from 1.8%
CPI and Housing Starts on tap in US
Pound softened a bit today in early London trade as moderately hawkish BOE minutes were offset by weaker than expected unemployment data and muted wage gains reports. The October minutes of the MPC meeting revealed that the committee produced a 7-2 vote with Sentance and Besley voting to hike to 5%. Nevertheless, most members thought the risks between growth and slowdown were finely balanced with the committee roughly breaking up into three camps. The three groups in the MPC included the hawks who wanted a preemptive rate hike to quell any budding inflationary pressures, the moderates who were open to the idea of the hike but were hesitant to implement one at this time for fear of triggering excessive market expectations of additional rate increases and doves who saw no need to tighten policy at present. However, the gently hawkish effect of the report was immediately blunted by news that UK unemployment claims rose an unexpected 10.2K against 0K projected and wages climbed a more modest 3.6% rather than 3.7% anticipated. Overall tonights news suggested that given the slackening labor demand BOE may choose to pursue one more month of wait-and-see monetary policy holding off on raising rates in November. As a result sterling sold off below the 1.8700 levels as traders began to doubt the possibility of a November hike.
In US today the CPI release could prove to be the last economic release of the week to move the markets especially if it prints hotter than expected. The market is looking for 0.2% month over month jump with yearly gains capped at 2.9%. If the number breaks the psychologically important 3.0% barrier the recent cautionary Fed rhetoric regarding the dangers of inflation will suddenly be taken more seriously by the market. Currency traders may even start to entertain the idea of additional rate hike from the Fed something that presently almost no one expects to happen.
