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What’s happening: The British pound edged higher against the US dollar this morning, ahead of the Bank of England’s policy decision.
What happened: The GBP/USD forex pair recovered on Wednesday, after the US ADP reported a slowdown in labour demand.
Investors also reacted to the US Federal Reserve’s interest rate decision later in the session.
Why it matters: The British pound has been among the best performing currencies among the G10 nations so far this year, driven by the UK’s better-than-expected economic data releases.
The S&P Global/CIPS UK Composite PMI, released last month, surged to its strongest level in seven months.
Data released on Wednesday showed the Nationwide House Price Index in the UK declined 0.2% year-on-year in January, after a 1.8% decline in the prior month. This was better than market expectations of a 0.9% decline.
The Bank of England is scheduled to announce its policy decision today, with markets widely expecting policymakers to keep interest rates unchanged. Speculations are for the BoE to reduce rates by around 100 basis points (bps) this year, versus expectations of the US Fed lowering rates by about 130 bps and the European Central Bank by around 140 bps.
The US central bank maintained its benchmark interest rates in the range of 5.25%-5.50% during its first meeting of the year.
On Wednesday, the Automatic Data Processing reported that US employers hired just 107,000 workers in January, compared to the previous month’s 158,000. The latest reading also fell short of market expectations of 145,000, which exerted pressure on the US dollar.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell by more than 0.1% to 103.27 on Wednesday.
The GBP/USD rose around 0.1% to 1.2695 in early trading today, following a slight decline in the previous session. However, the forex pair recorded a 0.1% gain last month. London’s FTSE 100 fell 0.47% to close at 7,630.57 on Wednesday.
What to watch: The BoE is likely to keep interest rates unchanged for the fourth consecutive time, with traders fully pricing in the first rate cut in June.
Investors also await the release of economic data on manufacturing PMI and labour productivity from the UK today. The S&P Global UK manufacturing PMI is expected to increase to 47.3 in January, from 46.2 in December, while analysts expect labour productivity in the country to fall by 0.2% in the third quarter, compared to a 0.7% rise in the prior period.
Context: Shares of Boeing gained on Wednesday, following better-than-expected quarterly results.
Details: The aerospace titan swung to an operating profit in the fourth quarter, recording adjusted operating income of $90 million, versus a year-ago loss of $642 million. Commercial airplanes revenue surged by 13% year-over-year to $10.48 billion, while deliveries increased by 3%.
Defence, space & security revenue rose 9% to $6.75 billion, while Global services revenue grew by 6% year-over-year to $4.85 billion.
The company said its overall quarterly revenues grew by 10% year-over-year to $22.02 billion, topping the consensus estimates of $21.10 billion, with 157 commercial deliveries during the latest quarter.
Adjusted loss shrank to 47 cents per share, from $1.75 per share in the year-ago period. The announcement was also better than Wall Street expectations of a loss of 78 cents per share.
Boeing declined to issue a forecast for 2024, following its 737 Max 9 production woes. The company’s 737 Max 9 model returned to service last week, after 171 jets were grounded by the Federal Aviation Administration following a door plug blowout on an Alaska Airlines flight in early January.
How shares responded: Boeing’s shares rose 5.3% to close at $211.04 on Wednesday, following the release of quarterly results. The stock has lost around 16% over the past month.
What to watch: Investors will continue monitoring Boeing’s production of 737 MAX jets, which is very important for the company’s recovery ahead.
Other Markets: European indices closed mostly lower on Wednesday, with the DAX 40 and CAC 40 down by 0.40% and 0.27%, respectively, and the STOXX Europe 600 Index up by 0.01%.
Russia and Ukraine exchanged prisoners of war, with Moscow announcing the return of 195 prisoners. The news sent the RUB/USD slightly higher in forex trading this morning.
Thailand’s S&P Global manufacturing PMI rose to 46.7 in January, from December’s reading of 45.1. However, the manufacturing sector contracting for sixth straight months exerted pressure on the THB/USD forex pair.
Ireland’s AIB manufacturing PMI rose to 49.5 in January, from 48.9 a month ago, amid growth in output and export orders, which sent the EUR/USD pair slightly higher in forex trading this morning.
Australia’s export prices rose by 5.6% during the final three months of 2023, recovering from a 3.1% decline in the prior quarter. The country’s export prices expanded for the first quarter in three quarters, lending support to the AUD/USD forex pair.
Japan’s au Jibun Bank manufacturing PMI edged higher to 48.0 in January, compared to December’s 10-month low of 47.9, which sent the JPY/USD pair higher in forex trading this morning.
Russia’s manufacturing PMI, Türkiye’s manufacturing PMI, foreign exchange reserves and MPC meeting summary, Spain’s manufacturing PMI and new passenger car registrations, Italy’s manufacturing PMI and consumer price index, France’s manufacturing PMI, Eurozone’s manufacturing PMI, jobless rate and inflation rate, South Africa’s manufacturing PMI and total vehicle sales, Brazil’s producer price inflation, balance of trade and manufacturing PMI, Mexico’s business confidence and manufacturing PMI, US Challenger job cuts, initial jobless claims, unit labour costs, S&P Global manufacturing PMI, construction spending, ISM manufacturing PMI and natural gas stocks change, Canada’s manufacturing PMI, as well as Australia’s CoreLogic home value index.
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