Pound has another wobble

After a period of respite the pound suffered another trip lower in trading yesterday. The downturn came shortly before Bank of England governor Mark Carney’s speech to the House of Lords and the likely cause was down to comments from Chancellor Philip Hammond. Mark Carney's speech itself did not contain any fireworks and the market expectation of future UK interest rates was unchanged after the speech. Mark Carney did acknowledge that inflation is moving higher on the weaker pound but signaled that the Bank of England will look through this and allow inflation to overshoot the BoE target for a period. However Philip Hammond earlier in the day suggested that the government would be happy to see more QE in the future and that they would not be solely looking at the economic arguments in the Brexit negotiations. This feedback initiated the downturn in the pound which was already on shaky ground ahead of Mark Carney's speech later in the day.
 
Main focus on US Markit PMI services for October
 
Today the main focus will be on US Markit PMI services for October. If we see a strong services number today it would align with the recent strong ISM non-manufacturing data and be a bullish signal for US services in the final quarter of 2016. Yesterday Federal Reserve member John Williams said he still expects to see one more rate increase this year at the December meeting. There is now growing expectation of a December hike which is helping to drive the USD higher. 

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