Sterling wobbled yesterday as The Bank of England’s Monetary Policy Committee decided to keep rates on hold at 0.5%. The decision to stay put was no surprise. However, the accompanying Inflation Report, statement and press conference by Mark Carney highlighted how the economy had hit a soft patch of late adding drag to growth. A lot of this slack was put down to the bad weather seen in Q1 however recent poor data indicates this has rolled over to Q2 and can’t all be attributed to the Beast from the East. Markets still expect a 2018 rate rise. However, an August move now looks to be off the table leaving an 80% chance of a hike in November. The only data of note yesterday from the UK was Manufacturing Production m/m which dipped -0.1% slightly better than had been expected. GBP/USD continues to hover around the 1.35 handle.
Dollar bulls were dealt a blow yesterday as CPI from the States missed the target with the overall reading and the core reading printing 0.2% and 0.1% respectively, 0.1% lower than was expected for each. The dollar has been on a tear of late with the chances of four rate increases from the Fed currently around one in three. This soft print has seen USD/JPY again fail to breach 110 after coming within a hairsbreadth again yesterday. It has since retraced to around 109.35. EUR/USD has regained the 1.19 handle still highlighting the dollar run (for now) has run out of steam. There is no top-tier data from America today so politics and Trump will likely be the primary drivers for the dollar.