Dollar Pulls Back from Highs; Attention Shifts to BoE

The dollar has pulled back from fresh highs hit yesterday. The BoE inflation report hearings are in focus today.

Previous Day's Market Highlights

Sterling-dollar briefly fell below 1.34 yesterday for the first time since December, before regaining the 1.34 handle. Sterling-euro slipped towards 1.14, while euro-dollar reversed an earlier move to a fresh low within the 1.17-1.18 band.
 
Comments that the US and China had put a trade war “on hold” for the time being supported the dollar heading into yesterday’s session. Oil prices and US equities also benefited from the easing in tensions. The dollar later gave up some of its earlier gains.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1410 1.1520 1.1302 1.89%
GBP/USD 1.3420 1.4032 1.3390 4.58%
EUR/USD 1.1761 1.2243 1.1716 4.30%
GBP/AUD 1.7683 1.8476 1.7671 4.36%
GBP/NZD 1.9278 1.9755 1.9247 2.57%
GBP/CAD 1.7152 1.7985 1.7131 4.75%

Today's Market Highlights

The dollar has fallen back further from yesterday’s highs, with euro-dollar back above 1.18 this morning and sterling-dollar gaining above 1.34 ahead of the day’s BoE hearings. First up is the oral evidence session for Dr Gertjan Vlieghe’s re-appointment to the MPC (09:15 BST). This will be followed by Public Sector Net Borrowing (09:30) data and the BoE’s Inflation Report Hearing (10:00).
 
The BoE left interest rates on hold after a spate of disappointing data, particularly softer inflation and slow Q1 economic growth. Only a few weeks prior, markets had nearly completely priced in a rate hike in May. Investors will look for any further nuance in the Bank’s decision and how likely a rate hike later in the year is. Emphasis that a rate hike is still in play could strengthen the pound, but data over the coming months will remain the key driver of market expectations.
 
The afternoon is quieter, with only a few low-level US releases out, including the Richmond Fed Manufacturing Index, which is forecast to pick up in May (15:00). Tomorrow, the UK releases April inflation data, where any signs of a further slowdown in CPI could renew pressure on the pound. Also tomorrow, the Fed releases its latest meeting minutes.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:15 GBP MPC Member Vlieghe's Hearing
09:30 GBP Public Sector Net Borrowing (Apr) £7.100B £-0.262B
10:00 GBP Inflation Report Hearing
15:00 USD Richmond Fed Manufacturing Index (May) 9 -3

Caxton