The Bank of England minutes for 4 and 5 February headline announcements were as expected, the MPC voted unanimously (9-0) to leave interest rates and quantitative easing unchanged. The current ultra-loose monetary policy is interest rates at the record low of 0.50% and asset purchases (QE) at £375bn.
The ONS released the ILO Unemployment for February with the rate dropping to 5.7% below expectations of 5.8%. The UK claimant count fell to 823,000 in January, lowest since May 2008, with solid wage growth (+2.1%).
All of the above data was better than the median expectation of analysts and follows yesterday’s record low-inflation figures. With price growth near zero, unemployment falling and wages increasing, the feel good factor should be taking hold. This adds to the demand, fuelling the economic growth in a growth cycle.
UK General Election
At 12:00pm today the weekly Prime Ministers Questions (PMQs) are broadcast from Parliament. The positive macro data for the UK economy be welcomed by the current Prime Minister, David Cameron as the UK heads for the general election. Both major parties are nearly tied, depending on which sources of opinion polls are used. The improving economic situation is a benefit for the incumbent majority; however the risk of a European referendum is likely to be decisive. The uncertainty of a Grexit highlights the risk of contagion and potential impact to the UK.
In the FX markets GBP rallied on the back of the positive data, trading 60 pips higher as traders digested the information. The move was led by the subtle hints from the BoE that traders should pull forward their rate hike expectations, which had been pushed back following the low CPI figures.
The FTSE 100 is within touching distance of all-time record high, the last time the index traded at these levels was in the final days of 1999.