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BoE vote prompts selling
In London, traders are not worried about the Bank of England raising rates any time soon, but the illusion that rates will remain at historic lows forever has been shattered. The two votes in favour of increasing interest rates was as good as any signal to dump stock. Equities have enjoyed a rally in the past few sessions as Russia is being brought in from the cold.
With less than one month to go before Scotland votes on its independence, our market suggests a ‘No’ vote is likely with only 18% indicating a ‘Yes’ vote.
Airlines are a mixed bag too, as the drop in oil has given them a lift but the possibility of an Icelandic ash cloud grounding flights is hanging over the sector.
US markets await Fed minutes
In the US, the Dow Jones is up 25 points at 16,947. Volatility and volumes are low ahead of the Federal Reserve minutes tonight, and traders no longer have an interest in quantitative easing. The timing of the first interest rate rise is in play, and I suspect Janet Yellen does not want to rock the boat and raise rates too soon.
Copper makes late rally
Oil has edged higher as short covering kicks in; there is still speculation of oversupply and the chances of ISIS disrupting production have diminished.
Copper has made a late rally; the HSBC manufacturing report for China is due out overnight and traders are squaring their books ahead of the announcement. The red metal has now hits it 200-DMA of 315cents per pound.
Euro drops through $1.33
The pound’s losing streak has come to an end after two members of the MPC voted in favour of increasing interest rates. Traders were speculating that one member might be a hawk, but the that fact that two members voted for a rate rise caught the market by surprise. I get the impression that Martin Weale and Ian McCafferty are the only people in the UK who want an interest rate rise.
The euro has crashed through the $1.33 handle as traders brace themselves for the Fed minutes, and even a whiff of an early rate rise would cripple the euro.