BoE Minutes Show All Members Agreed to Hold Rate
The just released labour market data in Britain has signaled rising wage pressures in the nation, with average pay in the private sector growing at a faster than expected pace between February and April this year. Additionally, the minutes of the BoE’s June meeting revealed that the decision to leave the interest rate at a record low was unanimous.
Across the Atlantic, the major focus is on the FOMC interest rate decision later in the day. Though recent commentaries by Fed officials have hinted at no tightening in June, the meeting would still be closely monitored for cues on the future timing of the interest rate rise. In Europe, Euro zone’s final inflation report for May is likely to be attracting less than normal attention amid lingering worries about Greece.
Pound Sterling – UK Markets
Sterling is trading higher against the Euro and the US Dollar after the just released data showed that the unemployment rate remained steady at a multi-year low and average earnings in the nation ticked higher. Figures reveal that basic earnings, excluding bonus, rose well above market expectations for the period between February and April this year and the ILO jobless rate remained steady at 5.5% for the same period. In addition, the Bank of England’s latest monetary policy meeting minutes revealed that policymakers had voted in unison to leave the interest rate steady at the last meeting. Going forward, investor attention will drift towards tomorrow’s retail sales report and markets anticipate growth in retail sales to have eased for May after having bounced back strongly in April.
The Pound moved above the 1.56 mark against the US Dollar yesterday after data showed that inflationary pressures returned in May, ending the nation’s brief brush with deflation. Prices were pushed upwards notably by a rise in air fares and motor fuel prices.
US Dollar – US Markets
The US Federal Reserve is schedule to conclude its two day monetary policy meeting later today, with markets keenly awaiting guidance on the future course of interest rates in the US. Heading into the meeting, the US Dollar is trading on a weaker footing against its major currency peers. With markets widely anticipating that there will be no change in monetary policy at this meeting, investors are likely to eye the US Fed Chairwoman, Janet Yellen’s comments for cues on when the central bank plans to raise interest rates. Trading in the greenback will be particularly influenced by the release of the US Fed’s economic growth and inflation projections. Assuming that there will be no major dovish surprises from the Fed today, the US Dollar is likely to recover from its previous session lows.
The US Dollar lost ground against the Pound yesterday, while it traded in a close range against the Euro. The sentiment towards the greenback weakened after housing starts for May recorded a lower than expected reading.
Euro – European Markets
The Euro has edged higher against the US Dollar this morning. Economic data scheduled to come out shortly is likely to confirm that consumer prices across the 19-nation currency union rose in May, easing fears that the Euro region is set for a prolonged period of deflation. This release is likely to reaffirm ECB’s view that its stimulus measures are supporting the Euro zone’s modest recovery and gradually pushing the inflation rate closer to the central bank’s goal of just under 2%.
The Greek Prime Minister, Alexis Tsipras, yesterday in a speech to his parliament, accused the IMF of pushing the nation towards a cash crisis, but suggested that this week’s summit of European leaders could be the decisive moment following months of negotiations. Meanwhile, the ECB is likely to review its stance on ELA financing for Greek banks at its non-monetary policy meeting today. The Euro plunged against the Pound yesterday, as optimism about the health of the Euro zone’s largest economy dampened after the economic sentiment indicator for June in Germany dropped to the lowest level in seven months.
Other Currencies – Highlights
Data released earlier in the day revealed that Japan recorded a trade deficit for the second consecutive month, largely due to slower growth in the nation’s exports, with poor external demand now threatening to erode economic growth in the current quarter. However, adjusted trade deficit narrowed sharply for May, as the value of imports dropped sharply, falling for the fifth straight month, reflecting lower crude oil and natural gas prices. Following the trade numbers, the Japanese Yen is currently trading on a weaker footing against the US Dollar.
Market participants now look forward to the outcome of the US Federal Reserve monetary policy meeting later today for clarity on when the US central bank would implement a change in its policy stance. Going forward, investors will await cues from the BoJ’s policy meeting later in the week for the central bank’s views on the performance of the economy.