EU Chief Negotiator Barnier ready to work on alternative arrangements for the Irish border.

The Euro was initially undermined on Thursday by speculation that the ECB would change the inflation target and effectively signal more aggressive policies.

Firm US data also underpinned the US currency at the US Open.

The dollar, however, weakened sharply to 2-week lows after dovish comments from two senior Fed officials increased expectations of a 0.5% July rate cut. Sterling was protected by stronger than expected retail sales and slightly more positive Brexit rhetoric.

Global equities were boosted by stronger expectations of aggressive central bank policies. Oil prices declined amid fears over subdued global demand conditions.

Gold moved sharply higher to 4-year highs above $1,440 per ounce on dollar losses with silver at 12-month highs. Bitcoin moved back above $10,000.

The Euro lost ground ahead of the New York open following reports that the ECB was considering a change to its inflation target from the current definition of below, but close to 2%. The assumption was that the bank would relax its target and make it more symmetrical which would increase justification for further monetary easing and EUR/USD dipped towards 1.1200.

UK June retail sales increased 1.0% compared with consensus forecasts of a 0.3% decline and year-on-year growth strengthened to 3.8% from 2.2% with the data triggering initial Sterling support, especially after downbeat industry surveys.

The Office of Budget Responsibility (OBR) warned that any ‘no-deal’ Brexit outcome was likely to trigger a UK recession with a 2% GDP drop which maintained underlying Brexit concerns. The House of Commons, however, approved an amendment which would make it much more difficult for parliament to be suspended in the run-up to October 31st.

EU Chief Negotiator Barnier stated that he was ready to work on alternative arrangements for the Irish border while Irish Prime Minister Varadkar stated that he could see a route for resolving the Irish border issue. Slightly more positive rhetoric boosted Sterling with GBP/EUR bouncing from 1.105 while GBP/USD pushed sharply higher to near 1.2550 given the weaker dollar. GBP/USD was held below 1.2550 on Friday with further choppy trading likely during the day.

Economic Calendar

Expected Previous
07:00 EUR German PPI (Y/Y)(JUN) 1.40% 1.90%
07:00 EUR German PPI (M/M)(JUN) -0.10% -0.10%
09:30 GBP Public Sector Net Borrowing(JUN) - 4.46B
13:30 CAD Retail Sales Ex Autos (M/M)(MAY) 0.30% 1.00%
13:30 CAD Retail Sales (M/M)(MAY) - 0.10%
15:00 USD Michigan Consumer Sentiment(JUL 01) 98 98.2
16:05 FOMC Member J. Bullard Speaks - -
18:00 USD Baker Hughes US Oil Count - 784
21:30 FOMC Member Rosengren 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.