The Bank of England increased interest rates by 0.25% to 1.25% at the latest policy meeting which was in line with consensus forecasts..
The Swiss National Bank increased interest rates by 50 basis points to -0.25% at the latest policy meeting, contrary to consensus forecasts of unchanged rates at this meeting. The bank warned that inflation would be even higher without policy action and the central bank also dropped comments that the Swiss currency was overvalued. The franc jumped higher after the unexpected decision with weaker equity markets also contributing to defensive demand.
The Euro slumped to lows below 1.0150 against the franc before a limited recovery while the dollar collapsed to lows below 0.9650.
The Bank of England increased interest rates by 0.25% to 1.25% at the latest policy meeting which was in line with consensus forecasts. This was the fifth successive increase and the highest rate since early 2009. There was again a 6-3 vote as Haskel, Mann and Saunders voted for a 50 basis-point increase.
The bank warned that inflation was likely to be above 11% later in the year as retail energy prices increase again. It also stated that it would be forceful in combatting inflation with the scale, pace and timing of future hikes depending on their assessment of conditions.
The Philadelphia Fed manufacturing survey dipped to -3.3 for June from 2.6 previously and below market expectations of 5.5. There was a sharp dip in new orders into contraction territory with unfilled orders also declining while employment increased at a much slower rate. There was a slight easing of upward pressure on prices while companies were less optimistic over the outlook.
Initial jobless claims declined slightly to 229,000 in the latest week from a revised 232,000 previously, but above consensus forecasts of 215,000 while continuing claims were unchanged at 1.31mn.
US Treasuries initially lost ground with the 10-year yield increasing to fresh 10-year highs near 3.50%, but yields reversed as Wall Street equities moved sharply lower.
Treasuries continued to post strong gains towards the European close with fears over the US growth outlook triggering a sharp decline 10-year yields to below 3.25%.
German bond yields increased sharply with the 10-year yield above 1.80% which underpinned the Euro.
The dip in US yields, higher European yields and the SNB policy change contributed to sharp dollar losses. The move accelerated after the New York open with a liquidation of long dollar positions and stop-loss selling.
The dollar index posted a slide of over 2% from daily highs before regaining ground on Friday.
The Bank of Japan was under pressure to change policy, but resisted calls for a change and made no policy changes with short-term rates held at -0.1% and the 10-year yield cap at 0.25%.
The decision to maintain the very loose policy triggered a fresh round of heavy yen selling in global markets and also underpinned the dollar.
Equity markets posted sharp losses on Thursday with all major indices under heavy pressure as more aggressive global central bank tightening triggered a major loss of confidence.
The Bank of Japan decision helped underpin risk appetite with a tentative recovery in equities, but confidence remained fragile.
The Euro lost ground into the European open with post-Fed dollar selling seen as overdone. Higher German yields then triggered a recovery in the Euro. US May housing starts dipped sharply to an annual rate of 1.55mn from 1.81mn previously and well below consensus forecasts of 1.70mn while building permits slowed to 1.70mn from 1.82mn. The data reinforced Fed Chair Powell’s narrative of a softening housing market.
Lower bond yields undermined dollar support. US currency selling accelerated on long liquidation. EUR/USD surged to highs at 1.0600 before a correction to 1.0515 on Friday.
Lower Yields and a Wall Street slide pulled USD/JPY lower with lows near 132.00 on Thursday. The yen slumped after the Bank of Japan move to keep policy unchanged. USD/JPY jumped to highs above 134.50 before settling just below 134.00.
The Swiss franc surged with USD/CHF sliding to lows below 0.9650. Sterling initially dipped sharply after the BoE policy decision before revering course. GBP/USD surged to highs at 1.2400 before fading to just below 1.2300 as UK economic confidence remained very weak.
After initial weakness, most commodity currencies rallied strongly amid US losses. AUD/USD surged to above the 0.7000 level and held just above this level on Friday. The Canadian dollar, however, was unable to make headway with USD/CAD at 1.2945.
|10:00||Euro-Zone Core CPI (Y/Y)(MAY 01)||3.50%||3.80%|
|10:00||Euro-Zone CPI (M/M)(MAY)||0.60%|
|13:30||CAD Foreign Securities Purchase(APR)||46.94B|
|13:30||CAD RMPI (M/M)(MAY)||-2.00%|
|14:15||USD Capacity Utilization(MAY)||79.00%|
|14:15||USD Industrial Production(MAY)||1.10%|