The pound stabilized in Asian trading on Friday after dropping over 1% yesterday following the Bank of England’s dovish tone at its November policy meeting. Markets were surprised that the Bank’s latest UK growth and inflation projections were based on interest rates staying on hold until at least 2017. However, speaking in an interview after yesterday’s press conference, BoE Governor Mark Carney said that rates are likely to go up in 2016 and that the cycle will be more gradual and shallower than previous cycles.
Sterling hovered around the 1.52 level against the US dollar in early Asian trading before slipping down to 1.5193 in late session. Against the euro, the pound was steady around 0.7155 pounds per euro.
The dollar was higher against the euro and the yen on Friday as investors await October’s jobs report for clues on whether the Fed will raise rates in December. Nonfarm payrolls are forecast to rise by 180,000 following a weak September reading. On Thursday, Atlanta Fed President Dennis Lockhart confirmed that the Fed deliberately worded the October FOMC statement so that to convince investors of the possibility of a December rate hike.
The greenback was again attempting to break the 122 handle against the yen today after coming just shy of the level on Thursday. It was last trading at 121.90 yen in late Asian session.
The yen was under pressure slightly after comments from Bank of Japan Governor Haruhiko Kuroda. Speaking in Tokyo, Kuroda said that a prolonged slowdown in China and other emerging markets is the biggest risk currently facing the Japanese economy. However, he said that the Bank of Japan is currently in the view that it can achieve its inflation target by continuing its policy but added that the BoJ won’t hesitate to ease policy if the downside risks increase.
The euro kept to a tight range against the dollar and was little changed in late Asian session. It was last trading 1.0877 dollars. Weak German industrial production figures had limited impact on the single currency. The disappointing data added to yesterday’s poor factory orders, raising concerns about slowing manufacturing output in the Eurozone’s largest economy. Industrial production fell by 1.1% month-on-month in September, sharply below forecasts of a 0.5% rise.
Oil prices were flat on Friday following two straight sessions of heavy losses. US oil futures were trading at $45.44 in late Asian session, having fallen around 6% since Wednesday on a strong dollar and oversupply concerns.
Coming up later today, UK manufacturing and industrial production figures will be the main data in European trading. But all eyes will be on the US nonfarm payrolls data for October later in the day, which will include the unemployment rate and the latest earnings numbers. A better-than-expected figure will fuel expectations of a December lift-off but weak numbers would likely lead to a dollar sell-off.
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