Bank of England signals August interest rate rise

Sterling

Sterling rallied higher on Thursday after the Bank of England switched their interest rate votes to 6-3.

GBP/USD hit year-to-date lows on Thursday but bounced on the BoE decision. Brexit related uncertainty had also provided a weight, but this dissipated as Prime Minister Theresa May avoided a rebellion midweek.

On the event calendar this week, Bank of England Governor Carney is expected to speak on Wedneday ahead of GDP and mortgage lending data on Friday.

US Dollar

The Dollar Index hit a new year-to-date high on Thursday above 95 but failed to hold as Thursday & Friday data releases disappointed. Fed Governor Powell spoke Wednesday stating ‘’with unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong’’.

On the event calendar this week, we expect comments from Fed President’s Bostic and Kaplan later today while Rosengren and Bullard follow later in the week. Data wise, house prices and consumer confidence are out later today, followed by durable goods and pending home sales on Wednesday, GDP on Thursday, and PCE, Chicago PMI and Michigan sentiment on Friday.

Euro

The Euro weakened across the board last week. ECB governing council member Ewald Nowotny’s comments provided a weight as he said he sees the Euro depreciating against the Dollar. No shocks from Mario Draghi as he said they are clearly seeing an upward trend in underlying inflation while factors holding back wage growth are gradually waning. Italian political appointments also weighed on the Euro.

Still to come this week, Euro Zone confidence indicators plus German retail sales and CPI while Euro Zone and French CPI prints follow on Friday alongside German unemployment.

Japanese Yen

BoJ Governor Kuroda took a dovish stance on Wednesday which weighed on the Japanese currency. USD/JPY spent the latter part of the week around 110 handle.

This week brings us BoJ opinions & BoJ core CPI early in the week with retail sales on Thursday followed by Tokyo CPI, unemployment and industrial production data on Friday.

Swiss Franc

Safe-haven demand saw modest gains for the Franc last week. There was not much reaction to SNB as they left rates on hold. The SNB reaffirmed they will remain active in the foreign exchange market as necessary.

This week we await ZEW survey data tomorrow and the KOF leading indicator on Friday.

Australian Dollar

The Australian Dollar has been hampered by rising trade tensions between the US and China in recent trade sessions.

Australian data releases are sparse this week – new home sales and home loans are due on Friday.

Canadian Dollar

USD/CAD surpassed 1.33 last Thursday to its highest level since June 2017.

NAFTA negotiations are in limbo, wholesale sales were also soft on Thursday. However, the Dollar was sold aggressively on Friday as Retail Sales data and CPI both came in significantly weaker than expected.

Looking ahead, it’s a slow week of data before Friday’s GDP report.

New Zealand Dollar

The New Zealand Dollar tumbled to a new 2018 low versus the Greenback on Thursday after New Zealand GDP fell short of expectations.

Data wise, New Zealand trade figures are due tomorrow before ANZ business confidence later in the session and building consents on Friday.

Swedish Krona

Investors remain cautious around the Swedish Krona after it fell sharply last week following calls from the Swedish Democratic party for an EU referendum after the political party took a significant lead in the opinion polls. Looking ahead, Swedish retail sales are out tomorrow followed by household lending growth on Friday

 

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