t was a tale of two central banks last week as Bank of England governor Mark Carney lived up to his reputation of the unreliable boyfriend with an unexpectedly dovish quarterly inflation report, in the face of ample evidence that the UK economy, despite a Q3 slowdown, appears to be ticking along nicely.
The Bank of England's dovishness stands in stark contrast to the US Federal Reserve who have been fairly consistent in their expectation that markets could expect a US rate rise sometime this year.
This expectation became much closer to reality after a blistering US October jobs report on Friday.
Not only was the jobs report overwhelmingly positive, with the best jobs growth numbers seen this year, but we also saw a rise in average earnings above expectations.
While markets will continue to absorb the likely consequences of last week's US jobs report on emerging markets, and the potential for future US dollar strength, attention will also shift back to the UK economy this week with the release of the latest unemployment numbers and wages data.
If this week's data continues in the way it has in recent months it will further call into question as to why the Bank of England was so downbeat on the prospects of a possible rise in interest rates.
With wages rising at around 3% and unemployment at 5.4% expectations of a possible rise in interest rates were still well off into the first part of next year, so it wouldn't have been too much of a surprise to see the Bank of England err towards the hawkish side in its assessment last week.
Much to the surprise of the markets they were completely the opposite, citing concerns about a slowdown in China and emerging markets, the very same concerns that the Federal Reserve played down in their most recent statement.
Given Friday’s US jobs report it also raises the question as to what it is that the Bank of England is seeing that the Federal Reserve isn’t?
This combination of a hawkish Federal Reserve and a dovish UK central bank has crushed the pound in the last few days, sending it down to its lowest levels since April around the 1.50 level, and has raised concerns in some quarters that in their haste to keep market expectations in check that Bank of England forward guidance is now becoming something of a joke.
In reality it is more a case of forward misguidance than anything else, and it seems quite likely that despite the Bank of England’s pessimism, UK data will continue to improve as we head into the end of the year.
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