Daily Market Color November 3, 2016Rates Hold Steady Prior to Payroll Friday, BoE Outlines “Neutral Stance” After holding the federal funds rate steady at 0.25%-0.50% yesterday, the Fed announced that it would only require “some” additional evidence in the form of steady inflation and employment data to support a tightening at the December meeting. With the presidential election looming next week, the decision marked the seventh consecutive meeting in which borrowing rates were left unchanged. Thursday’s mixed economic data provided minimal verification of the Fed’s targeted growth, but maintained levels that would do little to alter the near-term rate outlook. Highlighted in the reporting was nonfarm productivity, which reversed Q2’s 0.2% contraction by posting 3.1% annualized growth, surpassing median forecasts of +2.2%. The ISM non-manufacturing index contrarily fell below expectations, posting a 54.8 reading (vs 56.1 expected), weighed down by a reduction in the pace of hiring. Also missing the market consensus, initial jobless claims came in higher than expected at 265,000, matching the highest level since early August, but still holding below the 300,000 threshold for the 87th straight week. The employment situation for October will be further defined when nonfarm payroll figures are released tomorrow morning. Forecasts call for a 175,000 increase in jobs, a noticeable improvement from September’s 156,000 rise. The Bank of England captured headlines abroad today when it announced that plans for further interest rate cuts in 2016 had been abandoned. Governor Mark Carney categorized the new outlook as “a neutral stance”, where monetary policy will be tightened or eased depending on the inflation level. The Monetary Policy Committee left current interest rates unchanged and affirmed that the existing asset purchasing program (445 billion pounds) would continue. Adding to the shakeup in the U.K., England’s High Court ruled today that the government must hold a formal vote in Parliament before officially starting the nation’s process of exiting the European Union. Prime Minister Theresa May had previously rattled investors and markets last month when she publicly stated her intention to invoke Article 50 as soon as March 2017. The British pound rallied on the news, gaining against all major currencies and improving 1.2% against the dollar to $1.25/GBP. A different “pound” was highlighted today when the Central Bank of Egypt made the surprise decision to float its currency, the Egyptian pound. The decision complemented a move to increase interest rates by three percent and was seen as a liberating action for the currency, which had been previously dominated in a black market that took advantage of dollar shortages. After the announcement, the Egyptian pound sharply depreciated from roughly 8.88 pounds per dollar to over 13 pounds per dollar. Overall, the change in currency structure fulfills one of the several requirements made by the IMF in order to receive a $12-billion loan. All three major U.S. stock indexes finished down between 0.15%-0.95% on the day while Treasury yields/swap rates were largely unchanged, with a marginal 2-3bp uptick on the 30-year term. The rout on oil continued following yesterday’s U.S. record stockpile rise, as WTI crude traded down 1.45% while Brent trimmed 1.05% to $44.70/barrel and $46.40/barrel, respectively.