The Federal Reserve held interest rates unchanged. Several members forecast 2 rate cuts for 2019.

The Federal Reserve held interest rates unchanged. Several members forecast 2 rate cuts for 2019 and markets continued to price aggressive cuts despite median projections of cuts being delayed until next year.

US Treasuries advanced with the key 10-year yield dipping below 2.0% for the first time since late 2016. The dollar overall declined sharply, but expectations of ECB action limited the potential for Euro gains.

Sterling corrected higher as expectations of dovish policies by other global central banks provided support ahead of Thursday’s Bank of England meeting.

Commodity currencies rallied with stronger than expected inflation data helping to trigger sharp gains for the Canadian dollar.

Gold gained strong support with an advance to the highest level for over 5 years. A weaker dollar and Middle East tensions helped underpin oil prices.

The UK CPI inflation rate declined slightly to 2.0% for May from 2.1% previously with the core rate slightly above expectations even with a decline to 1.7% from 1.8%. To some extent, markets had been braced for a lower figure and Sterling rallied slightly after the data, especially as UK yields edged higher. The headline CBI industrial orders index declined to -15 for June from -10 the previous month and the lowest reading since October 2016, although there was resilience outside the car sector.

Sterling again secured protection from expectations that global central banks would engage in more dovish policies.

GBP/USD moved above 1.2600 and strengthened further following the Fed statement while GBP/EUR rose to near 1.1260. The latest Bank of England statement will be watched closely on Thursday with the potential for further Sterling support if the committee still signals that rate increases are likely over the medium term while a more dovish stance would undermine the UK currency. Dollar weakness dominated in early Europe with GBP/USD near 1.2700.

Economic Calendar

Expected Previous
07:00 CHF Trade Balance(MAY) 2.870B 2.294B
09:00 ECB Economic Bulletin - -
09:30 GBP Retail Sales (Y/Y)(MAY) 4.60% 5.20%
09:30 GBP Retail Sales (M/M)(MAY) - -
09:30 GBP Retail Sales ex-Fuel (Y/Y)(MAY) 2.50% 4.90%
09:30 GBP Retail Sales ex-Fuel (M/M)(MAY) -0.40% -0.20%
12:00 BOE MPC Vote Cut(JUN 01) - 0.00%
12:00 BOE MPC Vote Hike(JUN) - 0.00%
12:00 BOE MPC Vote Unchanged(JUN) 900.00% 900.00%
12:00 BoE QE Purchase Target(M/M)(JUN) 435B 435B
12:00 BoE Rate Decision(M/M)(JUN) - 0.75%
13:30 USD Current Account Balance 130.0B -134.4B
13:30 USD Philadelphia Fed. Manufacturing Index(JUN) - 16.6
13:30 USD Continuing Jobless Claims 1.688K 1.695K
13:30 USD Initial Jobless Claims 220K 222K
15:00 Euro-Zone Consumer Confidence(JUN) -6.5 -6.5
21:00 BoE Gov Carney Speaks - -

*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.