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Positive US data fails to boost the Dollar

Positive US data fails to boost the Dollar

Friday saw the market continue to react to the Bank of England’s (BoE) decision to hold interest rates at 0.5%. The BoE is now saying that there is no chance of 0% interest rates and that 0.25% will be minimum level. The BoE’s chief economist Andy Haldane has stated that doing too much holds much less risk than doing too little, leading the markets to expect aggressive UK policy easing at the August meeting.

Early in the European session Sterling continued to strengthen, with GBPUSD reaching highs above 1.3450. These gains were not maintained, however, as news of potential UK monetary easing and strong data from across the pond meant that the Pound lost some value against the Dollar. This morning, Monetary Policy Committee (MPC) Member Weale speaks on the implications of the Brexit for monetary policy. Dovish comments will likely cause another Sterling selloff.

There was a raft of data released from the States on Friday, mostly giving a positive outlook on the US economy. Although there was no change in CPI inflation, Core Retail Sales smashed expectations and returned GBPUSD back to the 1.3290 levels. Industrial Production followed this, also beating expectations at 0.6%. This meant an overall positive day for the Dollar with GBPUSD closing below 1.3200 and EURUSD closing below 1.1100.

The Euro strengthened by 0.61% versus the Pound during Friday’s European trading session as European CPI met expectations at 0.1% and raw Trade Balance figures showed an increase in exports relative to imports. A decline in risk aversion has also pushed German 10-year bond yields to move above zero for the first time in 3 weeks. The single currency ended the week at around the 1.1954 levels.

Data to Watch: 9.15am GBP MPC Member Weale Speaks.

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