In the UK, all eyes will be on Bank of England Governor Mark Carney’s speech at 11:00 am in Newcastle. Following the recent run of upbeat UK economic data releases and BoE chief economist Andy Haldane’s surprise shift last month to support an immediate hike in interest rates, market expectations for an August rate hike have increased to around 70%.
Comments from Carney will be watched for further signs that the BoE is edging towards hiking next month.
Ahead of Friday’s US payrolls report, the ADP employment estimate will be watched to provide an insight into the strength of private sector employment last month. We expect a rise of 195k, which would be consistent with a rise of around 200k in non-farm payrolls.
The minutes to the last US Fed rate-setting meeting are released tonight. At the meeting, the Fed nudged up policy rates by 25bps, while the updated ‘dot plot’ pointed to two further hikes by year-end. Any discussion around the risks that ongoing trade tensions present to the economic and interest rate outlook will be closely watched for.
Following yesterday’s better-than-expected UK services PMI, the pound continued to find some support.
Media reports suggest that David Davis has told Theresa May that her latest plan is unworkable and is likely to be rejected by Brussels. In a bid to garner support for her ‘third way’ proposal, the Prime Minister is travelling to Berlin today to meet with German Chancellor Angela Merkel.