Today the Bank of England is holding its monthly monetary policy meeting. Investors are looking forward to the outcome of this gathering because lately there have been signs that the economy of the United Kingdom is recovering from the pandemic at a steady pace and a tightening of monetary policy might be needed soon.
Update: Now that the results from the meeting are in, it is clear that the Bank of England is choosing to be cautious, just like the Federal Reserve. It kept interest rates and bond purchases unchanged, and its governors voted unanimously that no changes are necessary as of yet.
The other most significant event on the economic calendar today is the publication of initial and continuing jobless claims in the United States, together with the 4-week average through the end of July.
Investors are always interested in jobless claims but with yesterday’s deeply disappointing ADP jobs report, today’s releases are especially important. The markets are trying to gauge the US labor market situation before the publication of the July non-farm payrolls and unemployment rate tomorrow, which typically have the potential to rock the markets.
This data will be even more relevant right now after FOMC member Richard Clarida spoke about the possibility of the Fed announcing a tapering of bond purchases before the year’s end. Clarida, who is seen as the most influential Fed governor, aside from Chairman Jerome Powell, also said that some of the central bank’s targets can be reached before the end of next year, provided growth remains at its current pace.
Some glitches along the way which may cause a slowdown in the economic recovery of the United States (and other parts of the world) pertain to the coronavirus pandemic. The United States declared another 112K new Covid-19 cases yesterday, its highest daily increase since early February.
There are parts of the US with very low vaccination rates who are currently responsible for most of the coronavirus infections. The US is still in favor of opening its borders to travelers, however, but it will require that visitors be fully vaccinated.
China, which has already been seeing a slowdown in economic growth this year, is also in trouble over Covid-19. The outbreaks in China are worsening, and the government is canceling flights and trains within the country, and may be considering tighter restrictions to stop the spread of the disease.
Meanwhile, US stock indices today will trade slightly better thanks to positive reports and the ongoing earnings season. Uber is going to report its quarterly earnings today.
