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UK services PMI adds fuel to rate hike camp - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 4, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – James Knightley, Research Analyst at ING, notes that the UK October reading of the UK’s service sector purchasing managers’ index has come in at 54.9 versus 53.3 in September (consensus 54.5).

    Key Quotes

    “When combined with the manufacturing and construction PMIs, we get a composite figure of 55.4. This is the highest reading since July and points to an acceleration in GDP growth to around 0.6%QoQ in 4Q15 versus the slightly disappointing outcome of 0.5% in 3Q15.”

    “Significantly, the employment components in all three series are pointing to growth while new orders for the composite series rose to 55.3, suggesting a decent pipeline that will keep production rising strongly.”

    “Given this positive outlook, we suspect at least one other MPC member will join Ian McCafferty in voting for a BoE rate rise tomorrow – most likely Martin Weale since he voted for a 25bp rate rise between August and December last year along with McCafferty.”

    “However, the fact that inflation is at zero means the majority will continue to back steady policy. Inflation will climb sharply in coming months as last year’s negative impulse from the plunge in energy prices drops out of the annual comparison. With Mark Carney continuing to suggest that the decision whether to raise rates or not will come into “sharper relief” (for him) around the turn of the year we favour May as the start point for rate rises – after the Federal Reserve, but well ahead of current market expectations that it is still more than twelve months away.”
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