Morning Report – Thursday 6th August

Main Headlines

The Bank of England left its monetary stimulus unchanged and said it doesn’t plan to tighten policy until it’s more certain about the outlook for inflation. Policy makers led by Governor Andrew Bailey voted unanimously to keep the asset purchase target at £745 billion while holding the benchmark interest rate at a record low 0.1%.

Gold has extended its rally hitting a fresh record high this morning after soaring past the $2,000 an ounce mark for the first time in history as investors seek a safe haven.

European stock futures fell with Asian stocks amid further tensions in China-US relations and uncertainty over the U.S. stimulus package. S&P 500 futures were little changed. Treasuries rose and WTI crude edged lower.

GBP

Sterling is edging higher again against a broadly weaker dollar as the U.S. coronavirus relief package stalled in Congress and U.S. bond yields sank. Sterling climbed back toward pre pandemic highs and was advancing towards a five month peak hit last week versus the greenback. The pound extended its advance after the Bank of England maintained its policy stimulus and signalled rates would stay low. The central bank kept interest rates and bond purchases unchanged today as expected and said it won’t tighten policy until inflation moves sustainably to its target.

EUR

The euro is trading a touch below two year highs against the dollar, extending its bull run since European leaders agreed on a recovery fund on July 21. Euro zone business activity returned to modest growth in July as some curbs imposed to stop the spread of the coronavirus were lifted, but the rebound in the bloc’s dominant service industry was not as sharp as expected.

USD

The dollar is on the defensive this morning with mounting concerns the U.S. economic recovery may lag other countries due to a high level of coronavirus infections, as investors looked to upcoming data on the U.S. labour market. The dollar extended losses in the previous session after data showed U.S. private payrolls growth slowed sharply in July, suggesting the labour market recovery was faltering. A decline in the U.S. currency has gathered pace since late July on rising perception that the U.S. economic recovery could be hobbled by the country’s poor performance in containing the COVID-19 outbreak.

Main Economic Data/Central Banks/Government (All Times BST)

7:00 a.m.: German Industrial Orders
7:00 a.m.: UK BOE Rate Decision
8:30 a.m.: UK Halifax House Prices
9:00 a.m.: Italy Industrial Output
1:30 p.m.: US Jobless Claims