UK rate cuts coming & GDP impresses

In comparison?to what the market had expected, there was only a minor change in the Bank of?England's?decision-making and press conference yesterday. The 9-member Bank of England Monetary Policy Committee voted 7 to 2 to keep the base rate on hold at 5.25%. In the previous?meeting?that split?had?been 8 to 1. The two dissenters voted for a 25?basis point interest rate cut and?the?bank’s?statement heavily suggested we will see an interest rate cut sometime in the summer. That weakened the pound but only by half a sentence?the US?dollar and sterling have recovered significantly this morning after stronger-than-expected economic growth data. UK gross domestic product increased by 0.2% in the year to March and by 0.6% in the first quarter of the year. That is the first quarterly growth we have seen since Q2 2023. Those numbers were well above the market forecasts, as were industrial production and manufacturing production figures,?which were?also released this morning. Had the Bank of England been less dovish, sterling would have strengthened significantly today but, as?at?this morning, in the interbank market,? ￡1 will buy USD 1.2530, EUR 1.1630, AUD 1.8960, NZD 2.0810 or CAD 1.7145. The next?big?ticket data item for the UK comes on Tuesday when we will see the unemployment data for March. The forecasts are strong, so a further recovery for the pound cannot be ruled out.

Canadian unemployment?expected?to post another rise

Canada's?unemployment rate has been trending higher for over a year now. The April data, due for release this?afternoon?looks set to be another step in that direction.?Pre-COVID,?Canada's?unemployment rate was?running at?around 5.5%,?give or take?a few basis points.?So?this?rising trend is a concern for the Canadian authorities and is something the Bank of Canada will be watching very closely, although they?haven’t?started to cut interest rates yet to ease the burden. If the number rises to 6.2%, as the markets expect, is that enough to start the Bank of Canada down the same route as the Bank of England in hinting at interest rate reductions in the months ahead? Right?now?the GBP CAD rate is a tad higher at CAD 1.7145.?Evidently,?unemployment days?how?will influence where this is by the end of the day.?

Today's?Major Economic Releases

12:30 CAD Net Change in Employment(Apr)?

12:30 CAD Unemployment Rate(Apr)?

14:00 USD Michigan Consumer Sentiment Index(May)

Interbank Exchange Rates