Talking Points:

Bank of England Meeting Minutes in Focus in European Trading Hours
Firm UK Jobs Data May Hurt Sterling if MPC Hints at Guidance Revision
Aussie Dollar Outperformed in Asia After 4Q CPI Lifted RBA Policy Bets

Minutes from January’s Bank of England policy meeting headline the economic calendar in European hours. Traders will be watching to see if the recent run of upbeat UK economic data has started to stoke discussion about revising the parameters of the central bank’s forward guidance framework.

BOE Governor Mark Carney and company have stressed that the object of setting discrete thresholds that need to be crossed before tightening is an option is to divorce improving news-flow from rate hike bets. If that remains the case, pushing back against recently firming policy bets may call for lowering the bank’s unemployment rate target.

Such a move would amount to a dovish development and any discussion about undertaking it in today’s minutes is likely to weigh on the British Pound. In fact, against that backdrop, another drop in Jobless Claims and a slide to a four-year low of 7.3 percent on the three-month Unemployment Rate may prove to hurt rather than help Sterling, boosting the likelihood of an imminent dovish guidance revision.

The Australian Dollar outperformed in overnight trade after the benchmark year-on-year CPI inflation rate unexpectedly jumped to 2.7 percent in the fourth quarter, trumping forecasts calling for a print at 2.4 percent. The currency tracked Australian bond yields higher following the outcome, hinting the print marked a supportive shift in RBA policy bets.

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