The pound consolidated against its major rivals during the overnight trade after the Bank of England reported that Britain faces weaker outlook for economic growth, adding to the signs the central bank may extend its QE program. BoE Governor Mervyn King said yesterday the UK economy faces a “markedly weaker” outlook amid persistent danger from turmoil in the euro area. Sterling was also undermined after figures showed that UK unemployment rose to 8.3% in the three months through September and joblessness among young people climbed above 1 million for the first time since 1992. Overnight, Nationwide consumer confidence index fell sharply to 36 in October, from 45 in the previous month as Europe’s debt crisis and economic outlook worsened. Looking ahead to today, Retail Sales report for October headlines the economic calendar, with the expectations for the figures to fall by –0.3% and core sales excluding auto fuel to drop by 0.2%.
The euro dropped during early morning trade before Spanish government auction up to 4 billion euro of bonds today, and France sell as much as 8.2 billion euros of debit. The Italian 10 year bond yields fell yesterday after European Central Bank purchased larger than usual amounts under its Securities Markets Program. ECB President Mario Draghi said on November 3 that euro area economy is heading toward a “mild recession” by the end of the year. Expect for the single currency to remain under pressure as the likelihood of further ECB rate cuts are weighing on the single currency.
The dollar gained across the board during the Asian session on increased market risk aversion, but the US currency still remains volatile before Federal Reserve Bank of New York President William Dudley speaks today. Mr Dudley said last month that it’s “possible that we could do another round of quantitative easing”. The central bank announced in September a plan to replace 400 billion dollars in shorter maturity debt holdings with longer-term securities in a bid to reduce borrowing costs. Also scheduled for today are the Housing Starts for October and Philadelphia Fed Business Survey for November.
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