GBP Up on Employment Data; CAD Rallies

The highlight yesterday was the Bank of Canada’s first rate hike since 2010. The BoC increased interest rates from 0.50% to 0.75%, as markets had widely speculated, and struck a hawkish tone. The Canadian dollar gained over 1.8% against the pound; the rate fell below 1.6400 for the first time since March.

Previous Day's Market Highlights

The highlight yesterday was the Bank of Canada’s first rate hike since 2010. The BoC increased interest rates from 0.50% to 0.75%, as markets had widely speculated, and struck a hawkish tone. The Canadian dollar gained over 1.8% against the pound; the rate fell below 1.6400 for the first time since March.
 
After hitting a peak around 1.1490 the previous day, euro-dollar eased back but largely held above 1.1400. Sterling-dollar rallied after the release of UK employment data, which saw the Unemployment Rate fall again to 4.5% and average earnings inch higher, more than reversing initial losses to retest 1.2900 by the afternoon. Sterling-euro retested 1.1300 from earlier lows below 1.1200.
 
The dollar traded in both directions after Fed Chair Yellen’s Semiannual Monetary Policy Testimony, in which she did not take a notably more hawkish tone and continued to emphasise that the pace of hikes would be gradual. Some Fed members have recently expressed greater concern over the recent slowdown in inflation.   

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1306 1.1469 1.1176 2.55%
GBP / USD 1.2941 1.3031 1.2589 3.39%
EUR / USD 1.1446 1.1490 1.1119 3.23%
GBP/AUD 1.6785 1.7107 1.6612 2.89%
GBP / NZD 1.7754 1.7881 1.7338 3.04%
GBP / CAD 1.6480 1.6996 1.6350 3.80%

Today's Market Highlights

Fed Chair Yellen testifies again today (15:00 BST) but is unlikely to say anything substantially different from her remarks yesterday. Traders will keep an eye on theProducer Price Index data out beforehand (13:30 BST). Slower price growth could weigh on the dollar.
 
Sterling traders will keep an eye on the BoE’s Credit Conditions & Bank Liabilities Surveys (09:30 BST). Politics remains is again in focus as the government publishes the Repeal Billtoday. Debate and likely amendments over the coming months may prompt volatility in the pound, although the bill is ultimately expected to pass.
 
Fed Member Evans gives the keynote address at the Annual Rocky Mountain Economic Summit (16:30 BST), and Fed Member Brainard speaks at the National Bureau of Economic Research (18:00 BST). 

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP BoE Credit Conditions & Bank Liabilities Surveys
13:30 USD Producer Price Index YoY (Jun) 1.9% 2.4%
13:30 USD Core Producer Price Index YoY (Jun) 2.0% 2.1%
13:30 USD Initial Jobless Claims (8 Jul) 245K 248K
13:30 CAD New Housing Price Index YoY (May) 3.5% 3.9%
13:30 CAD New Housing Price Index MoM (May) 0.3% 0.8%
15:00 USD Fed Chair Yellen Testifies
16:30 USD Fed Member Evans Speaks
18:00 USD Fed Member Brainard Speaks
19:00 USD Monthly Budget Statement (Jun) $-35B $-88B