Sterling Rallies on MPC Dissent

Sterling rallied yesterday as the BoE’s decision to keep interest rates on hold was a closer call than expected. Three members dissented in favour of raising rates: Ian McCafferty and Michael Saunders joined Kristin Forbes, who leaves the MPC at the end of the month. The dissent comes as inflation accelerated to 2.9% in May.

Previous Day's Market Highlights

Sterling rallied yesterday as the BoE’s decision to keep interest rates on hold was a closer call than expected. Three members dissented in favour of raising rates: Ian McCafferty and Michael Saunders joined Kristin Forbes, who leaves the MPC at the end of the month. The dissent comes as inflation accelerated to 2.9% in May.
 
The pound jumped over 0.7% against both the euro and the dollar. Sterling-euro hit 1.1450 for the first time since the election. Sterling’s gains against the Canadian dollar saw the rate eye but not break 1.7000, which it last hit on Monday.
 
The MPC meeting followed disappointing Retail Sales data, which saw sales fall from April to May and slow compared to the same period a year prior.
 
Euro-dollar fell towards 1.1140. The dollar strengthened after the Fed signalled Wednesday that it would start reducing its balance sheet later this year and may remain on track to hike interest rates for a third time. US Initial Jobless Claims and Philadelphia and New York manufacturing indices surprised to the upside. On the other hand, Industrial Production missed forecasts. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1668 1.1732 1.1277 3.35%
GBP / USD 1.2769 1.3040 1.2635 3.11%
EUR / USD 1.1153 1.1290 1.1099 1.69%
GBP/AUD 1.6832 1.7506 1.6684 4.70%
GBP / NZD 1.7705 1.8899 1.7442 7.71%
GBP / CAD 1.6935 1.7710 1.6796 5.16%

Today's Market Highlights

Final Eurozone CPI (10:00 BST) is expected to confirm that inflation slowed to 1.4% in May and that core inflation slowed to 0.9%. Although the ECB has removed its interest rate easing bias, interest rates are likely to remain on hold for the time being as the ECB watches the pace of low underlying inflation. The figures may have limited impact barring any unexpected revisions.
 
In the afternoon (13:30 BST), the US releases housing data, gains in which could offer the dollar support. The main Canadian release is Foreign Securities Purchases (13:30 BST).
 
While the economic calendar is quieter next week, UK politics will be in sharp focus. Brexit talks between the UK and the EU begin on Monday. The Queen’s Speech has been rescheduled from Monday 19 June to Wednesday 21 June.  

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 GBP Final CPI YoY (May) 1.4% 1.4%
10:00 EUR Final Core CPI YoY (May) 0.9% 0.9%
13:30 USD Building Permits MoM (May) 1.250M 1.228M
13:30 USD Housing Starts MoM (May) 1.215M 1.172M
13:30 CAD Foreign Securities Purchases $15.13B
15:00 USD Michigan Consumer Sentiment Index (Jun) 97.1 97.1