The Nation Newspaper

Tag: Bank of England

  • Dollar weakens as cautious Fed leads to rate-hike rethink

    The dollar weakened against other major currencies on Thursday as markets took Federal Reserve Chairman Jerome Powell’s comment that U.S. interest rates were just below neutral as a signal that a three-year rate-hiking cycle is nearing an end.

    The dollar index, which measures the value of the greenback against a basket of other major currencies, fell 0.2 per cent to 96.64 — its lowest level in almost a week.

    Powell took markets by surprise on Wednesday when he noted that the policy rate, at 2 to 2.25 per cent, is now “just below” the broad range of estimates of neutral which in September was 2.5 to 3.5 per cent.

    That marks a departure from comments in October when Powell said rates were a “long way from neutral at this point”.

    “Clearly, Powell’s comments about where the neutral interest rate is has created a shift in market expectations with respect to Fed policy,” said Jane Foley, a senior currency strategist at Rabobank in London.

    “That is a dovish factor for the dollar and is positive for risk appetite.”

    That shift was reflected in money markets where expectations of Fed rate increases declined to around 47 basis points over the next year from 52 basis points earlier this week.

    The dollar was also weaker across the board and was last down 0.4 per cent at 113.25 yen and a quarter of a per cent weaker against the euro.

    The euro fetched $1.1394, having touched $1.13975 – its highest in almost a week.

    Benchmark 10-year U.S. Treasury yields fell to their lowest level since September at 3.013 per cent on Thursday, adding to the bearish sentiment towards the dollar.

    Read Also: Naira loses marginally against dollar at investors’ window

    Focus now turns to the release this session of the October U.S PCE price index, the Fed’s favoured inflation gauge, for more clues on the outlook for U.S. interest rates. Minutes from the Fed’s November meeting are also released later in the day.

    Analysts said the minutes were likely to reaffirm market expectations for a rate hike in December, but were unlikely to have a significant impact, since market focus has now turned to whether the Fed will pause the tightening cycle next year.

    Dollar weakness in the wake of Powell’s comments was expected to be limited, given a note of caution ahead of the G20 summit on Friday and Saturday where U.S. President Donald Trump and China’s President Xi Jinping are scheduled to discuss contentious trade matters.

    Rodrigo Catril, senior currency strategist at NAB, said safe-haven buying could return if there were no signs of a truce between Washington and Beijing over the course of the G20 summit.

    Elsewhere, sterling rose to $1.2830, but weakened 0.2 per cent against the euro to 88.81 pence, reflecting uncertainty about whether British Prime Minister Theresa May be able to get her Brexit deal approved by a fractious parliament.

    The Bank of England warned on Wednesday that Britain risked a bigger hit to its economy than it suffered from the global financial crisis a decade ago if it leaves the European Union in a “disorderly” manner, which would include a 25 per cent crash in the value of the pound.

    NAN

  • Naira remains stable against Dollar, Euro

    Naira remains stable against Dollar, Euro

    The Naira on Monday remained stable as it traded at N362 to the dollar at the parallel market, same amount it was sold last Friday.

    The Naira also closed against the euro at N481 at same market in Lagos.

    At the Bureau De Change ( BDCs ) window, the Naira also recorded same stability.

    It traded at N362 to the dollar, while the euro was sold at N482 since last week.

    Data from the Financial Market Dealers Quote ( FMDQ ) showed that the indicative exchange rate for the I&E was at N360.15 per dollar.

    The exchange was an appreciation of 0.01 percent from N360.19 per dollar recorded last Friday.

    The Central Bank Of Nigeria ( CBN ) rate closed at N305.95 to the dollar.

    Some of black market operators and BDCs told our reporter that there was no figure for pounds.

    They were skeptical about trading naira for the currency because of the banknote changes by Bank of England.

    The old £10 note is set to go out of circulation on March 1, 2018.

    However, old notes can still be spent ahead of the cut-off date or exchanged at the bank once the point has passed.

    The old paper fivers went out of circulation on May 5, 2017.

    NAN

  • Britain’s central bank to hold first strike in 50 years

    Britain’s central bank to hold first strike in 50 years

    Trade union members at the Bank of England, Britain’s central bank, will go ahead with the first strike action by staff for over 50 years on Tuesday, the Unite union said on Monday.

    Last-minute talks facilitated by a government-run arbitrator failed to resolve the pay dispute with the bank,’’ the union said after it agreed to delay the start of strike action “in a gesture of goodwill”, the union said.

    Some 95 per cent of staff in maintenance, security and other service roles voted earlier this month for four days of strike action from Monday over a long-running pay dispute.

    “The strike will now take place from Tuesday to Thursday.

    “Unite members are calling on the Bank of England to give staff fair pay following the imposition of a derisory pay settlement without negotiating with recognised union Unite,’’ the union said.

    It said that the dispute was caused by the bank’s imposition of a 1 per cent increase on its total wage bill for the current financial year, while it leaves rises for individual staff at the discretion of line managers.

    However, the bank made no immediate comment on the planned strike.

  • Bank of England may cut rates, says chief economist

    The Bank of England may have to cut rates to combat low inflation, rather than raise them as its next move, its chief economist, Andy Haldane, has said.

    UK inflation may not pick up in the second half of the year, and there are risks of fallout from emerging economies, he said in a speech.

    “Should those risks materialise, a rate cut would be a viable option,” he said.

    UK interest rates have been held at a record low of 0.5 per cent for more than six years.

    Softening employment figures and weakening surveys on manufacturing and construction output suggested growth in the UK could slow in the second half of the year and inflation might not pick up as expected.

    Furthermore, problems in emerging markets could be a drag on UK growth and the headwinds from those economies were unlikely to abate any time soon, Mr Haldane added.

    He described recent events in Greece and China as “the latest leg of what might be called a three-part crisis trilogy.”

    “The balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside,” Mr Haldane said.

    The case for raising interest rates was “some way from being made”, he added.

    “Were the downside risks I have discussed to materialise, there could be a need to loosen rather than tighten the monetary reins as a next step to support UK growth and return inflation to target,” he said.

    However, former Monetary Policy Committee member, Andrew Sentance was scathing about Mr Haldane’s analysis.

    “Sorry to say, but Andy Haldane’s spouting rubbish here,” he tweeted. “Cutting interest rates from all-time low is unnecessary. Doing so when economy is in 7th year of recovery is totally foolish.”

    “Andy Haldane seems to have no concept of longer-term need for interest rates to strike balance between savers and investors,” he added.

    According to Howard Archer of IHS Global Insight, Mr. Haldane has “cemented his place as the arch-dove” on the Monetary Policy Committee (MPC).

    “While there is currently considerable uncertainty as to when the Bank of England is likely to start raising interest rates, Andy Haldane’s stance looks isolated within the MPC,” said Mr Archer.

    His views seem to be at odds with fellow MPC member Ian McCafferty, “who has voted for an interest rate hike from 0.50 per cent to 0.75 per cent at both the August and September MPC meetings.”

    “Furthermore, Martin Weale and Kristin Forbes have both indicated their belief that interest rates will need to rise sooner rather than later,” he added.