Weekly Market Update 25 June – BoE kept rates unchanged despite higher growth estimates, US employment data in focus next week

1. Dollar edged lower against the major currencies while commodity currencies and equities benefited from the risk-on market sentiment witnessed throughout the week. With Fed Chairman Jerome Powell’s assurance that there will be no interest rates hikes around the corner as he indicated “We will not raise interest rates preemptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances”, the upside of the greenback remains capped. Looking ahead, investors will be keeping a close watch on US employment data and ISM Manufacturing PMI data, which should point to a gradual job recovery and an expansion in factory activities.

2. Across the Atlantic, Sterling pared recent losses against the Dollar and Japanese Yen and underperformed against the commodity currencies. In BoE’s recent monetary policy meeting, the central bank remained firm in keeping their exceptionally loose policy approach, citing the higher inflation as transitory while revising growth estimates higher. Looking ahead, key economic data releases include final estimates of first-quarter GDP growth, Markit Manufacturing PMI and Nationwide housing prices which should confirm UK’s economic contraction during the first quarter as household consumption and business investment declined with stricter measures implemented.

3. Elsewhere, Euro rallied against the Dollar but failed to hold its ground against the commodity currencies. Looking ahead, preliminary inflation rates and unemployment data for the Eurozone and Germany will be closely watched. The consumer price inflation rate is expected to soften in June, easing from May’s two-and-a-half-year high and returning to the ECB’s target of just below 2%.