Weekly jobless claims down ahead of US jobs report.
- Weekly jobless claims below 350,000 again last week;
- Euro rallies on Draghi press conference;
- Vote against ECB rate cut not unanimous;
- King fails to sway two more members at MPC meeting.
- Stock markets indices are trading higher across the board today, despite decisions from the BoJ, BoE and ECB to leave monetary policy unchanged.
Instead, traders looked to the economic data out of the US, in particular the weekly jobless claims ahead of the jobs report tomorrow. Once again, jobless claims were below 350,000 last week, which suggests the drop since the beginning of the year is a sign of things to come, rather than a temporary blip in the data.
This should bode well when the unemployment figure is released tomorrow. As it stands, the rate is expected to remain at 7.9%, however the sustained fall in new claims suggests we could see a drop to 7.8%, especially if non-farm payrolls come in close to the ADP figure released on Wednesday.
The central bank meetings didn’t offer too much in the way of new information today, despite traders initially seeing comments from Mario Draghi as more hawkish. It was always going to be unlikely that the ECB would cut interest rates at this stage, with inflation only just falling back to 2%.
On top of that, the stronger currency has highlighted the need for certain member states to continue along the path of reforms in order to regain competitiveness. Given that the ECB were forced to take the pressure off these countries with the introduction of OMT’s, they may wish to use the stronger currency to reiterate the importance of keeping up the pace.
That being said, Draghi did not confirm whether or not the vote was unanimous, instead saying that the consensus was for no change. This clearly suggests there are some members of the governing council pushing for a rate cut and with inflation forecast to fall to 1.6% this year, it surely only a matter of time before we see it.
The Bank of England decision to keep monetary policy unchanged was also expected, despite the vote being much closer than we anticipated in February. The unusual thing about this meeting was Sir Mervyn Kings inability to convince other policy makers to increase the asset purchase facility, something history suggests tends to occur the month after King adds his name to the those voting in favour.
