LONDON, Nov. 19, 2015 /PRNewswire/ -- For the second month running, UK inflation was reported as negative at -0.1%, meaning the Bank of England (BOE) will most likely not raise interest rates until early 2017.
This is despite last week's headline economic data, which showed that the UK has its lowest unemployment rate since 2008 at 5.3%. However, the August/September jobs report was actually mixed, with conflicting signals on unemployment and slightly softer than expected news on underlying wages growth.
"Sterling is a long-term bullish currency given expectations to raise rates in late 2016 or early 2017. On November 5, MPC bank rate votes were unchanged at 8-1. The BOE was also more dovish than expected saying that the outlook for global growth is weaker than in August, trimming its growth outlook for this year and 2016," explains Jarratt Davis, head of FX at Smile Global Management.
"CPI inflation is now expected to remain below 1% until the second half of 2016. The market implied bank rate shows rate liftoff in Q1 2017 for the first rate hike, as opposed to the previous Q2 2016. On November 11 the headline Claimant Count Change missed estimates slightly, showing that 3,300 people joined unemployment benefits, above the 1,500 expected."
"Average Weekly Earnings also marginally missed expectations coming in at 3.0% versus expectations of 3.2%. This however is still excellent wage growth and is the second consecutive month of 3% growth."
Another positive for the UK economy was the Unemployment Rate which dipped to 5.3%, below expectations of 5.4%. This marked the lowest level of unemployment since the GFC.
"Gross Domestic Product for Q3 missed estimates for the Preliminary reading, coming in at 0.5% for the quarter and 2.3% for the year. A fuller picture of the growth situation will be available with the Second Estimate reading," adds Jarratt Davis.