The Bank of England meeting proved more hawkish than expected which saw UK Gilts move lower as currency traders pushed the GBP higher and equity traders drove the FTSE 100 to its highest close on record. The BOE meeting showed that members voted 8-1 to maintain rates at the 0.25% level with 1 member voting for a rate hike. In addition, the BOE did not add more to their asset Purchase facility, which they left at 435B. Forecasts out of the BOE further cemented the more hawkish tone as we saw their projections for GDP upgraded from 0.5% to 0.6%. Some warning notes were however struck as we saw mention made of the likely hood of wage rates staying sticky given the Brexit uncertainty.
ECB`s Nowatny hit the wires late last night to strike a hawkish tone in which he stated that the ECB could raise interest rates sooner than later, although it would use a different method than that used by the Fed given the difference between the structure and integration status of the two unions. This led to a late push in the EUR, which saw the EURUSD lifted from near session lows of 1.0710 to test 1.0770.
The USD Index, a measure of the USD against a basket of currencies, continued to be sold off as bears drove the USD to the 100-support level adding to the previous day’s pressure on the USD which came on the back of a dovish FOMC statement and projections, which although made provision for further interest rate hikes, they were also quick to add that the FOMC would adopt a wait and see approach in which economic data was the driver for more tightening of the monetary policy.
Today sees just such data being released in the form of the Capacity Utilization Rate, Industrial Production m/m and Prelim UoM Consumer Sentient figures being released. Better than expected release will see the USD regain some of this week losses as bulls managed to hold the 100-support level on the USD index. However, worse than expected releases will see the USD fall further as more buyers jump ship going into the weekend.