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Mark Carney has dramatically upgraded growth forecasts for the UK, this comes as the BoE revised growth forecasts significantly while keeping their inflation forecast unchanged. Fears of the bank leaving London post-Brexit have also now been dismissed.
The Bank of England expects the UK economy to grow by 2% this year, up from its previous forecast of 1.4% in November. 2018 and 2019 forecasts have also been increased by 0.1% each year and the unemployment rate could potentially fall to 4.5%, down from a previous estimate of 5%. The upgrade to growth prospects comes after strong consumer spending forecasts were attributed to a weaker currency. However, the Bank has been cautious as it admitted there have been problems in assessing how Brexit and Trump will impact the local and global economy. Despite the upward revision for growth, investors sold off sterling as they were left disappointed by Mark Carney’s cautiousness with regards to Brexit as he said the journey has just started.
Market news
It’s time to look forward to the weekend and it’s the first Friday of the month, Non-farm payrolls remain the main focus of the day. Over the past three months, Non-farm payrolls increased steadily with an average of 165K new jobs created. Today’s number is expected at 180k with the market unemployment rate to hold steady at 4.7% and average weekly earnings to rise +0.3% mom. The expectation for a strong number today is reinforced by jobless claims earlier totalling less than expected this week, a pickup in non-farm productivity and drop in layoffs
Data to come
We will start to receive data from Europe this morning, including January PMI’s, where we’ll get the final revisions to services and composite readings for the Euro area. Germany, France and the UK will also publish services readings. The Euro area will see retail sales numbers for December released.
In the US all eyes will be on the January employment report and, of course, the nonfarm payrolls. The payrolls will not be the only main focus as services and composite PMI revisions will be released in the US, while the ISM non-manufacturing reading for January and factory orders in December will also be seen.
