Fed Hikes Rates, BoE Set to Hold

As expected, the Fed hiked interest rates by 25 basis points last night to a target range of 1.00% to 1.25%. The dollar strengthened as the Fed downplayed softer inflation figures and said it expects to begin reducing its balance sheet later this year. The dollar strengthened, reversing earlier losses.

Previous Day's Market Highlights

As expected, the Fed hiked interest rates by 25 basis points last night to a target range of 1.00% to 1.25%. The dollar strengthened as the Fed downplayed softer inflation figures and said it expects to begin reducing its balance sheet later this year. The dollar strengthened, reversing earlier losses.
 
According to the CME FedWatch Tool, markets are pricing in around a 47% chance that the Fed will hike rates again in December.
 
The dollar had weakened in the afternoon after Retail Sales and CPI disappointed. Euro-dollar rose around 0.8% to meet resistance around 1.1295. Sterling-dollar rose over 0.5% to briefly break back above 1.2800.
 
UK Average Earnings disappointed, slowing from March to April. Including bonuses, wage growth was 2.1% in the three months through April compared to the same period a year prior, down from 2.3% in March. The Unemployment Rate was unchanged at 4.6%.
 
The kiwi dollar weakened against the pound after Q1 GDP came in under forecasts. The Aussie strengthened as employment surprised to the upside. The unemployment rate fell to 5.5% from 5.7%.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1359 1.1732 1.1277 3.88%
GBP / USD 1.2736 1.3048 1.2635 3.17%
EUR / USD 1.1212 1.1290 1.1075 1.90%
GBP/AUD 1.6739 1.7577 1.6731 4.81%
GBP / NZD 1.7629 1.8899 1.7497 7.42%
GBP / CAD 1.6856 1.7822 1.6796 5.76%

Today's Market Highlights

Sterling will remain in focus today with May Retail Sales out this morning (09:30 BST) ahead of the Bank of England’s latest interest rate decision (12:00 BST). While inflation rose to 2.9%, the fastest pace since 2013 and above the Bank’s 2% target rate, no interest rate hikes are yet expected.
 
With monetary policy expected to remain unchanged, the Bank’s guidance will be key. Slower Retail Sales and a dovish tone from the BoE could weaken the pound.
 
Other items on the calendar include US weekly Initial Jobless Claims, Import and Export Price indices, New York and Philadelphia Manufacturing indices, and IndustrialProduction (13:30, 14:15 BST). 

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Retail Sales YoY (May) 1.7% 4.0%
09:30 GBP Core Retail Sales YoY (May) 1.9% 4.5%
09:30 GBP Retail Sales MoM (May) -0.8% 2.3%
09:30 GBP Core Retail Sales MoM (May) -0.8% 2.0%
12:00 GBP BoE Interest Rate Decision 0.25% 0.25%
12:00 GBP Monetary Policy Summary
12:00 GBP BoE Minutes
13:30 USD NY Empire State Manufacturing Index (Jun) 4 -1
13:30 USD Initial Jobless Claims (Jun 2) 242K 245K
13:30 USD Import Price Index YoY (May) 2.8% 4.1%
13:30 USD Import Price Index YoY (May) 2.8% 4.1%
13:30 USD Export Price Index YoY (May) 3.0%
13:30 CAD Manufacturing Shipments MoM (Apr) 0.7% 1.0%
14:45 USD Industrial Production MoM (May) 0.2% 1.0%
19:00 USD Fed Interest Rate Decision 1.25% 1.00%
19:00 USD Fed's Monetary Policy Statement
19:30 USD FOMC Press Conference
23:45 NZD GDP QoQ (Q1) 0.7% 0.4%
23:45 NZD GDP YoY (Q1) 2.7% 2.7%
02:30 AUD Consumer Inflation Expectations (Jun) 4%
02:30 AUD Unemployment Rate s.a. (May) 5.7% 5.7%
02:30 AUD Employment Change s.a. (May) 10.0K 37.4K
02:30 AUD RBA Bulletin