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The Federal Reserve held interest rates at 5.25%-5.5% yesterday
The Federal Reserve held interest rates at a 22-year high of 5.25-5.5% for the second consecutive month yesterday. Policymakers remain data-dependent but are leaving the door open for further tightening if necessary.
Ahead of the Fed’s interest rate decision, the US dollar’s strength was hindered by soft economic data and made marginal gains against the euro and pound. This morning, sterling gained momentum against the US dollar ahead of the Bank of England’s interest rate decision.
US job openings rose unexpectedly by 56,000 in September to 9.55 million. This marks the highest level in four months and exceeded economists’ forecasts of 9.25 million. Industries that recorded growth include accommodation and food services, and arts, entertainment, and recreation.
In the private sector, businesses in the US added 113,000 workers to their payrolls in October, fewer than market expectations of a 150,000 increase.
Further east, the Chinese factory activity fell unexpectedly to 49.5 in October from 50.6 in September. This was slightly below forecasts of 50.7 and points towards a recession, underlining the fragility of the economy.
Shares in office-sharing firm WeWork plummeted yesterday following reports that the firm is filing for bankruptcy. Its shares in New York fell more than 50% in early trading hours on Wednesday.
After failing to announce planned job losses workers were braced for, Tata Steel reported a net loss of 6,511 crores (£644 m) for the third quarter of 2023. Workers and unions remain in the dark over the expected job cuts to its Tata Steel’s Port Talbot works.
Today, economists will receive manufacturing PMI data for Spain, Germany, Italy and France.
The data release that awards today the name ‘Super Thursday’ is the Bank of England’s interest rate decision and monetary policy report.
Markets forecast the rate to remain unchanged at 5.25% for the second consecutive month, continuing the Bank’s wait-and-see approach regarding inflation and labour data.
Later on, US investors will receive the latest initial jobless claims, September factory orders and unit labour costs for the third quarter.
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GBP: Manufacturing PMI below expectations
The S&P Global UK manufacturing PMI rose slightly to 44.8 in October from 44.3 in September but remains below the consensus of 45.2. This signalled the eighth consecutive month of decline, marking the longest period of unbroken contraction since 2008/2009.
GBP/USD: the past year
EUR: Down on the pound
Since soaring to a five-month high on Tuesday, the euro lost 0.8% against the pound as recent economic data showed that the economy, Germany in particular, has continued to sour.
USD: Flurry of economic data
The ISM US manufacturing PMI slipped to 46.7 in October from 49 in September and below forecasts of 49. Readings below 50 indicate a contraction from the previous month, and this reading points to the eleventh consecutive contraction for the manufacturing sector.
Mortgage applications in the US sank by 2.1% last week, extending the 1% drop from the previous week to mark the third consecutive period of decline, according to the Mortgage Brokers Association.
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