Eyes on Eurozone & UK PMI’s following BoE rate hike

Daily Currency Update

Yesterday the Bank of England rose interest rates by 0.5bps to 5% which came as a surprise to the markets as May’s inflation proved to present persistent within the UK economy. The Pound rose sharply before retreating down moments later following the announcement, showing that the pound suffered from economic slowdown fears despite the rate hike from the BoE.

Early Friday morning the pound defended 1.2700 against the US Dollar and 1.1640 against the Euro, following the upbeat UK Retail Sales data. UK Retail Sales rose 0.3% in May vs. -0.2% expected and 0.5% previous. Core retail Sales which strip’s fuel sales, increased 0.1% month on month vs -0.3% expected and 0.7% previous figure. The annual UK Retail Sales decreased 2.1% in May versus -2.6% anticipated, along with April’s 3.4% decline while the Core Retail Sales dropped 1.7% versus -2.1% anticipated reading and a -3.0% previous.

The US Dollar gained momentum in the second half of the week. Dollar strength is seen mainly on the back of speculation for further tightening by the Federal Reserve, the likelihood of a further 25bps at the next US Federal Reserve meeting in July remains high elevated by the US employment data and prices. Fridays sentiment around the US Dollar remains in focus ahead of the Eurozone PMI’s, French, German and UK PMI data due for release early in the morning. Poor figures out from the Eurozone could help keep the US Dollar and pound elevated against the Euro to finish the week.