Today is all about the Bank of England’s monetary policy. The BOE kept the interest rate unchanged at its current level of 0.1%. Two members of the MPC voted to increase the asset purchase program. This means that the possibility of the bank increasing its asset purchase program isn’t imminent, but it isn’t out of the question. This is because the bank sees the economic risk skewed to the downside.
The bank confirmed that the housing market in the UK has ceased. They expect the economy to shrink to 14%, unemployment to rise to 8% and consumer spending to fall by 14% as well. This begs the question, is the bank is going to introduce any new measures in its future policy meeting? However, the fact is that current measures introduced by the Bank have saved a large number of bankruptcies and job losses. The UK’s economy is likely to bounce back by early next year if not later this year. There is no doubt that there will be some damage in terms of bankruptcies, but the government has done a great deal to fill in all the gaps.
The British pound erased its losses against the dollar on the back of the Bank of England’s decision. It had been under tremendous selling pressure for the last five days and it touched a two-week low yesterday. Leverage hedge funds, mostly speculative bets, hold mostly short bets on the currency.
US Weekly Jobless Claims May Surge to 3 Million
Over in the US, traders do not like to bet heavily ahead of the U.S jobless claims data, and especially this week. This is because tomorrow we are also going to get the mother of all economic numbers—the US NFP. It is expected that the US unemployment rate may surge to 16% in April. The March reading was 4%. This will be a staggering increase and it is likely to rock the boat for many investors. As for today’s jobless claims, it is anticipated that another 3.05 million may have filed for benefits and this will take the total number of Americans filing for unemployment benefits to nearly 33 million- a jaw-dropping number.
Chinese Caixin Still In Contraction
In Asia, markets closed mostly lower, due to the disappointing Chinese Caixin services Purchasing Managers data, that confirmed further weakness and printed the reading of 44.4. This number was slightly better than the previous print of 43, but the fact is that the actual reading still confirms that this economic data is in contraction territory—only a number above 50 confirms expansion and we are far from that level.
Oil Holds On To Its Gain
As for the black gold, oil prices are still trading positive and holding on to their gains today. The US crude inventory data exhibited yesterday that the supply glut may have started to ease off from its extreme level because the number came in at 4.6 million against the forecast of 8.5 million. The spread between the West Texas crude oil’s June and July contract has also narrowed. This means less panic among traders.
There isn’t much time left for the June contract to expire, but it seems that the price is holding onto its gain for now. If the momentum continues like this, we may see serious gains for the June oil trading contract with respect to its recent low when the price dropped below $7.