Sterling lost traction after the Bank of England lowered its growth forecasts.
The dollar remained under pressure following Wednesday’s Fed meeting with strong expectations of rate cuts, although the currency index found support just above 2-week lows.
Sterling lost traction after the Bank of England lowered its growth forecasts even though it still expected gradual rate increases.
The Swiss franc made strong gains amid fears over increased tensions over Iran. Oil prices also gained on Middle East tensions with WTI at 3-week highs.
The Norwegian krone gained sharply after the Norges Bank raised interest rates and expected to increase rates further this year. Gold continued to gain strong support and pushed to 5-year highs above $1,400 per ounce before correcting.
The US S&P 500 index hit intra-day record highs, although global markets were more cautious. Bitcoin pushed to 14-month highs amid strong demand for cryptocurrencies.
UK May retail sales declined 0.5%, in line with consensus forecasts, while annual growth slowed to 2.3% from 5.1% as Easter distortions came out of the data.
The Bank of England voted 9-0 to maintain interest rates at 0.75% which was in line with consensus forecasts. The bank downgraded the second-quarter GDP estimate and stated that there were downside risks to the economy given global trade tensions. The bank also indicated that wage growth might be levelling out, but the committee stated that gradual and limited interest rate increases would be needed if there was a smooth Brexit outcome.
The slightly more dovish stance undermined Sterling, but there was still a significant element of protection from expectations that other central banks would take an even more dovish stance. The Conservative Party leadership election will be between Johnson and Hunt after Thursday’s ballots. GBP/USD settled close to 1.2700 with GBP/EUR consolidating around 1.1230 and there was little change on Friday with markets wary over choppy trading.
Economic Calendar
| Expected | Previous | ||
|---|---|---|---|
| 08:15 | Markit Mfg PMI(JUN) | 50.6 | 50.6 |
| 08:15 | Markit Serv PMI(JUN) | 50.8 | 50.5 |
| 08:15 | EUR German PMI Composite(JUN) | 52 | 52.2 |
| 08:30 | EUR German Manufacturing PMI (M/M)(JUN) | 44.8 | 44.3 |
| 08:30 | EUR German PMI Services(JUN) | 55.5 | 55.7 |
| 09:00 | Euro-Zone PMI Composite(JUN) | 51.7 | 51.5 |
| 09:00 | Euro-Zone PMI Services(JUN) | 53 | 52.8 |
| 09:30 | GBP Public Sector Net Borrowing(MAY) | 5.10B | 4.97B |
| 13:30 | CAD Retail Sales Ex Autos (M/M)(APR) | 0.90% | 1.70% |
| 13:30 | CAD Retail Sales (M/M)(APR) | 1.00% | 1.10% |
| 13:30 | BoE MPC Member Silvana Tenreyro Speech | - | - |
| 14:45 | USD Manufacturing PMI(JUN) | 52.5 | 50.5 |
| 14:45 | USD Markit Services PMI(JUN) | 53.2 | 53 |
| 15:00 | USD Existing Home Sales(MAY) | 5.35M | 5.19M |
| 15:00 | USD Existing Home Sales Change(MAY) | 2.70% | -0.40% |
| 17:00 | FOMC Brainard Speaks | - | - |
| 17:00 | FOMC Member Mester Speaks | - | - |
| 18:00 | USD Baker Hughes US Oil Count | - | 788 |
| 20:00 | FOMC Member Mary Daly Speech | - | - |