US futures and European markets are trading slightly lower this morning and the volume may remain subdued as we approach towards the two biggest events of the week. It is what we call a calm before the storm and traders perhaps do not want to place any bets before they see the results of those events. Having said that, one of these events can very well be a lackluster which is the Bank of the England minutes.
Given that the inflation has fallen yet again to 1.6% yesterday and it is well below the BOE’s target of 2%, I will say that Mr Carney may not be under the knife any more to increase the interest rate any time sooner. The two mandates which the BOE is monitoring to measure the slack in the economy are certainly not pointing towards the trigger button of an increase in the interest rate. Given that the average earning is already under pressure and inflation has fallen further, there is no reason for any descent among the committee members. Some may argue that falling oil prices has also played its part in the falling inflation number, but it is way too early to see the impact of such prices on inflation number.
On the other side of the Atlantic, we do have the FOMC minutes due later in the day. The question which everyone will be asking is if the Fed are ready to increase the interest rate sooner than later. Some hawkish members have certainly started beating the drums of an early increase, Philadelphia Fed’s Charles Plosser is certainly the leader of that group. However, I do think that a more stable outlook may be given by Miss Yellen during her Jackson hole testimony when she will be grilled to provide more information on Fed’s exit strategy once they have wrapped up their tapering.
Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.