Markets considered the risks of an interest rate cut had increased, Sterling came under fresh selling pressure.

Global bond yields continued to decline with US yields at 33-month lows amid growth doubts and dovish central bank rhetoric.

The dollar was unable to make headway given lower yields and expectations of a July Fed rate cut with caution ahead of key jobs data also in evidence.

The dollar was unable to gain any significant traction during the day, although losses were also limited given expectations of dovish policies by other major central banks and EUR/USD settled just below 1.1300.

Sterling was undermined by poor construction data and expectations of a more dovish Bank of England stance following BoE Governor Carney’s comments.

The UK PMI construction index declined sharply to 43.1 for June from 48.6 the previous month. This was well below consensus forecasts and the weakest reading since April 2009 as activity declined in all three categories. Overall sentiment remained weak as political uncertainty sapped confidence, but supply chain pressures continued. The data reinforced near-term concerns over the outlook and Sterling dipped lower before attempting a tentative recovery.

Bank of England Governor Carney stated a tight UK labour market and inflation at target argued for a medium-term focus on inflation dynamics if there was greater clarity on Brexit. He also stated, however, that the risks of a global trade war and ‘no-deal’ Brexit had increased for now and that the central bank would make a detailed assessment of the outlook in the August inflation report.

Markets considered that the risks of an interest rate cut had increased, and Sterling came under fresh selling pressure with a GBP/USD dip to 9-day lows below 1.2600 while GBP/EUR fell to 1.1120 and Sterling remained on the defensive on Wednesday.

Economic Calendar

08:45Markit/ADACI Svcs PMI(JUN)-50
08:50Markit Serv PMI(JUN)51.751.7
08:55EUR German PMI Composite(JUN)52.452.4
08:55EUR German PMI Services(JUN)5555
09:00Euro-Zone PMI Services(JUN)52.552.5
09:00Euro-Zone PMI Composite(JUN)51.651.6
09:30GBP PMI Services(JUN)50.651
11:00MPC Member Cunliffe Speaks--
12:00USD MBA Mortgage Applications-1.30%
13:15USD ADP Employment Change(JUN)180K27K
13:30USD Trade Balance(MAY)-50.70B-50.80B
13:30CAD Trade Balance(MAY)-2.80B-0.97B
13:30USD Continuing Jobless Claims1.680K1.688K
13:30USD Initial Jobless Claims222K227K
14:45USD Markit PMI Composite(JUN)-50.9
14:45USD Markit Services PMI(JUN)-50.9
15:00USD Factory Orders(MAY)--0.80%
15:00USD ISM Non-Manufacturing PMI(JUN)55.556.9
15:30USD Crude Oil Inventories--12.788M

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.