The Bank of England maintained interest rates at 0.75% with a 9-0 vote which was in line with consensus forecasts..

The dollar drifted marginally lower amid a lack of conviction over medium-term interest-rate trends while bond yields edged lower.

Sterling strengthened to 3-month highs following comments from EU Commission President Juncker that a Brexit deal was possible.

Political hopes also provided an element of Euro protection with EUR/USD near 1.1050. The Swiss franc gained some ground as the National Bank resisted loosening policy.

The Norwegian krone reversed gains seen on a rate hike as the central bank indicated that rates may have peaked.

The dollar was unable to capitalise on gains following Wednesday’s Federal Reserve meeting and yield spreads moved slightly against the US currency while gains in the Euro-zone banking sector helped underpin sentiment. The Euro-zone current account recorded a surplus of 2.7% of GDP in the year to July which provided underlying Euro support.

President Trump continued to attack Fed policies, although he stated that Powell’s job was safe, limiting any dollar selling.

Overall, EUR/USD made limited gains to the 1.1060 area with some positive Brexit rhetoric also a factor supporting the single currency, although there was still selling interest on rallies. Markets will monitor comments from Fed speakers on Friday, although the tone may be non-committal with EUR/USD settling around 1.1060 on Friday.

UK retail sales declined 0.2% for August, in line with consensus forecasts, with a slowdown in annual growth to 2.7% from 3.4%.

The Bank of England maintained interest rates at 0.75% with a 9-0 vote which was in line with consensus forecasts. The bank maintained its view that gradual and limited interest rate increases would be required over the medium term if there was a smooth Brexit process. It also warned, however, that underlying growth had slowed and that some spare capacity had re-emerged while the increased fears over trade wars had weakened the outlook for global growth. There were also comments that further entrenched political uncertainty could damage demand and weaken inflation pressures.

Sterling had dipped into the decision and there was little further selling on the cautious statement, especially given dovish global central bank policies.

The UK government stated that it had sent written Brexit documents to the EU. After the European close, EU Commission President Juncker stated that he thought a Brexit deal was achievable. Although there was still major uncertainty, positive rhetoric boosted Sterling with stop-loss buying on a decisive GBP/USD break of 1.2500. It traded at 3-month highs above 1.2550 on Friday with GBP/EUR also at 3-month highs near 1.1350.

Economic Calendar

07:00EUR German PPI (Y/Y)(AUG)0.60%1.10%
07:00EUR German PPI (M/M)(AUG)-0.20%0.10%
09:30GBP Public Sector Net Borrowing(AUG)-2.65B-1.97B
13:15FOMC member John C. Williams speech--
13:30CAD Retail Sales Ex Autos (M/M)(JUL)-0.90%
13:30CAD Retail Sales (M/M)(JUL)-0.10%-0.20%
15:00Euro-Zone Consumer Confidence(SEP)-7-7.1
16:20FOMC Member Rosengren Speaks--
18:00USD Baker Hughes US Oil Count-733

*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.