And then there were 2!
The Pound was trading higher by 0.25% yesterday in reaction to the dovish hold by the Federal Reserve (Fed) in the US and riding the wave of the Dollar sell-off.
The Monetary Policy Committee, meanwhile, voted unanimously to keep the Bank Rate at 0.75% this morning. In a near ‘copycat’ move, the Bank of England (BoE) also saw downside risks increasing. The members pointed out that a no-deal Brexit scenario may still be in the cards and future adjustments from the central bank will rely heavily on how the economy reacts to the “nature and timing” of an EU withdrawal by the UK.
Meanwhile, in the conservative leadership race, Jeremy Hunt has promised Boris Johnson “the fight of his life” as the two compete to become the next Conservative leader and PM.
The US Dollar continues to be under heavy selling pressure after the FOMC left its fed fund rates unchanged. Further dismal economic readings yesterday added fuel to the negative sentiment. Market participants were left unimpressed by Fed Chair Powell’s delivery of a measured press conference.
The Committee remains data-dependent and signalled that they will prefer to look at the trend rather than a single economic data point before making the next move. Yesterday, the Philly Fed Business Outlook Survey weakened with growing uncertainties over the medium term. The index declined from 16.6 in May to 0.3 for this month.
The USD Dollar Index is at its lowest level in a week as the market continues to assess the wider implications of the recent announcement.
After an initial spike up to just over 1.3110 the Euro found some selling pressure and retreated back down to 1.2785. Markets will be monitoring closely the PMI data out for release today especially as it could have important implications for European Central Bank (ECB) policy and Euro sentiment.
Data to watch:
07:30 EUR Markit PMI Composite (Jun) (Germany)
07:30 EUR Markit Service PMI (Jun) (Germany)
07:30 EUR Markit Manufacturing PMI (Jun) (Germany)
08:00 EUR Markit Services PMI (Jun)
08:00 EUR Markit Manufacturing PMI (Jun)
08:00 EUR Markit PMI Composite (Jun)
08:30 GBP Public Sector Net Borrowing (May)
10:30 USD Fed’s Clarida speech
12:30 CAD Retail Sales (MoM) (Apr)
12:30 CAD Retail Sales ex Autos (MoM) (Apr)
13:45 USD Markit Manufacturing PMI (Jun)
13:45 USD Markit Services PMI (Jun)
13:45 USD Markit PMI Composite (Jun)
14:00 USD Existing Home Sales (MoM) (May)
16:00 USD Fed’s Brainard speech