Markets were more confident in US interest rate cuts with a July cut seen as certain.

Testimony from Fed Chair Powell was more dovish than expected with concerns over growth conditions and potential downside risks for inflation. Many Fed members also backed a near-term rate cut.

Markets were more confident in US interest rate cuts with a July cut seen as certain.

The dollar declined sharply after Powell’s comments with losses against all major currencies, especially with President Trump again pushing for a weaker currency.

Commodity currencies and the Euro rallied, but Sterling was still hampered by political and economic risks which limited support. Gold moved sharply higher on dollar weakness while the yen and Swiss franc were resilient.

A substantial inventory draw boosted oil prices with a weaker dollar also supportive. Bitcoin declined sharply as Powell stated reservations over Facebook’s Libra.

UK GDP increased 0.3% in May following the 0.4% April slide which was in line with consensus forecasts with year-on-year growth at 1.5% which was slightly above market expectations. Industrial production increased 0.9% for May as car output recovered from sharp April losses, although this was a weaker than expected recovery. Trade data was close to expectations while construction output beat consensus forecasts.

The NIESR stated that the economy is likely to contract for the second quarter, but avoid a technical recession. There was slight relief surrounding the GDP data, although Sterling was dependent on a weaker dollar to make headway and the Euro continued to test the 0.9000 amid underlying weak UK sentiment.

Bank of England MPC member Tenreyro stated that weaker global growth outlook would lengthen the period until there was enough inflation for her to back a rate hike. Sterling was little changed as GBP/EUR continued to hold near 1.1115. A tentative recovery in the RICS housing index provided marginal support with a GBP/USD move to 1.2530 as US weakness dominated.

Economic Calendar

07:00Germany CPI (M/M)(JUN)0.30%0.30%
07:00Germany CPI (Y/Y)(JUN)1.60%1.60%
07:00Germany Harmonised CPI (M/M)(JUN)0.10%0.10%
07:00Germany Harmonised CPI (Y/Y)(JUN)1.30%1.30%
10:30GBP Financial Stability Report--
11:15ECB Benoit Coeure Speaks--
12:00OPEC Meeting--
12:30ECB Monetary Policy Meeting Accounts--
13:30USD CPI (M/M)(JUN)-0.10%
13:30USD CPI (Y/Y)(JUN)-1.80%
13:30USD CPI Ex Food & Energy (Y/Y)(JUN)-2.00%
13:30USD CPI Ex Food & Energy (M/M)(JUN)0.20%0.10%
13:30USD Continuing Jobless Claims1.685K1.686K
13:30USD Initial Jobless Claims223K221K
13:30CAD New Housing Price Index (M/M)(MAY)0.10
14:10RBA Assist Gov Debelle Speaks--
15:00Fed's Chair Powell Testifies--
16:10FOMC member John C. Williams speech--
17:15FOMC Member Raphael Bostic speech--
18:30FOMC Governor Keith Randal Quarles Speech--
19:00Monthly Budget Statement(JUN)--208.0B
22:00FOMC Member Kashkari Speaks--
23:30NZD Business NZ PMI(JUN)-50.2

*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.