With one member down after the resignation of Charlotte Hogg (Bank of England’s deputy governor), the MPC voted 7-1 in favour of keeping interest rates on hold at 0.25 per cent on Thursday, with only Kristen Forbes (external member of the Monetary Policy Committee of the Bank of England) voting for a hike again. There was an air of anticipation earlier in the week with GBP/USD bulls hopeful of a new 2017 high. Any rallies were, however, met with strong resistance, with sterling failing to push above USD1.3000 three times.  Thursday’s Bank of England rate announcement then disappointed currency markets with many expecting at least one more member to favour a rate hike bringing the vote to 6-2. Governor Carney also made reference to the bank, basing its current forecasts on an assumed smooth exit from the EU, something that is seen as a bold assumption to make. These forecasts are therefore seen as overly optimistic by some and as such the pound dropped by over one cent by Thursday afternoon to levels where it has since consolidated.

EUR

The euro struggled to find a firm footing again after comments from ECB chief economist Peter Praet. Backing Mario Draghi’s recent comments, Praet reaffirmed that while the European economy is beginning to show signs of resilience, it is too early to contemplate an unwinding of quantitative easing and negative deposit rates. After a pro-EU French election result, expectations were growing that we could see hints of unwinding at the next ECB meeting in June. These comments from senior ECB officials serve to put a dampener on those prospects for now.

USD

Only US retail sales and inflation reports yesterday stood in the way of the US dollar closing out its strongest week for the year.

According to Bloomberg, the US dollar has gained against all of its G-10 peers this week, spurred by strong producer prices and jobless claims data. These robust number were re-enforced by two members of the Fed, Mester and Rosengren, both of who calling for further rate hikes in the US this year – the later calling for three more – surpassing the current Fed guidance of two.

 

 

 

 

 

 

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