Pound flat as BoE hikes to 4% and dollar steadies before payrolls

The Bank of England raised Bank Rate by 25 basis points to 4.00% in a unanimous 9-0 vote, according to the Bank's November Monetary Policy Summary and an investingLive European wrap. The move was fully expected, and Investing.com reports the pound was flat after the hike as the dollar's post-election slide paused ahead of US payrolls.

What moved and why

In its preview, investingLive described the decision as the first hike in the current tightening cycle. It cited stronger-than-expected activity, an improving labour market and persistent inflation pressure as the reasons the case for holding had weakened. Because the outcome matched forecasts, sterling found little fresh direction from the decision itself.

The broader story was the dollar steadying. Investing.com reports the dollar edged up as oil prices bounced, with traders now looking to payrolls. That follows a sharp drop in the dollar after the Democratic midterm sweep, which our earlier editions covered.

The latest ECB reference rates, from the 5 November fixing, show the dollar recovering part of the previous day's losses:

• EUR/USD fixed at 1.1224, down 0.38% from 1.1267 on 4 November.
• GBP/USD fixed at 1.3459, down 0.30% from 1.3500.
• USD/JPY fixed at 158.46, up 0.13%.
• AUD/USD fixed at 0.7000, down 0.21%.

Over five fixings, EUR/USD is still up 0.84% and GBP/USD up 1.07%. You can follow sterling on the GBP/USD chart.

US data and yields

US labour data came in firm. Initial jobless claims fell to 189,000 against a 196,000 estimate, investingLive reports. Continuing claims rose 23,000 to 1,718,000.

Third-quarter productivity rose 3.6% against 2.8% expected, while unit labour costs fell 0.7% against a forecast rise of 0.6%, according to investingLive. The outlet notes these figures look disinflationary but are volatile and largely ignored by policymakers.

Investing.com reports that US Treasuries hover near two-month lows on a 20% weekly oil crash and the midterm sweep.

Bank views on the dollar

Several banks published post-election views, as reported by Investing.com:

• Citi sees the dollar weakening against the yen after the midterms.
• HSBC sees Democratic strength weighing on the dollar in the near term.

These are the banks' views, not ours.

Europe and the ECB

German industrial orders rose 4.4% in September, short of the 4.8% expected, after a revised 10.1% drop the month before, investingLive reports. It credits a 10.5% jump in automotive orders but calls the recovery fragile.

ECB Executive Board member Isabel Schnabel gave a speech titled "Navigating stormy waters: reflections on monetary policy". The pack carries no summary of its content, so we do not characterise it here.

Politics in the background

investingLive cites The Independent reporting that Secretary of State Marco Rubio is "on resignation watch" ahead of a possible presidential bid. The same outlet notes that 40 of 41 local votes on data center curbs in the midterms were on track to pass.

What to watch next

1. US payrolls. Both Investing.com dollar headlines flag payrolls as the next test for the currency.
2. The Fed in December. investingLive's European wrap carried a piece asking what could stop the Fed raising rates in December, keeping a US hike on the table.
3. Oil. Investing.com links the dollar's bounce and the Treasury rally to swings in crude, so further oil moves remain a driver.