Risk appetite remained strong during Thursday on hopes that a US-China trade deal would include a cut in existing tariffs.

Risk appetite remained strong during Thursday on hopes that a US-China trade deal would include a cut in existing tariffs.

Global equities posted further gains despite corrections from intra-day highs and bond yields moved sharply higher.

The US dollar was resilient despite a potential dip in defensive demand as higher yields boosted the US currency. EUR/USD dipped to around 1.1050 despite higher German yields.

Sterling lost ground after two Bank of England members voted for a rate cut and overall forward guidance was more dovish.

The EU Commission lowered Euro-zone forecasts with GDP growth expected at 1.2% for 2019 and 2020 while inflation was expected to remain below 1.5% for the next 3 years. The Euro failed to gain any traction ahead of the US open and drifted in tight ranges. Significantly, the currency was unable to derive any benefit from optimism over US-China trade developments.

The Bank of England held interest rates at 0.75% following the latest policy meeting, in line with consensus forecasts. There was, however, a 7-2 vote split as Saunders and Haskell voted for an immediate rate cut. According to the statement, interest rates could move in either direction in order to meet the inflation target. If global growth fails to stabilise or Brexit uncertainty remains entrenched, monetary policy may need to be eased while, if these risks do not materialise, policy could be tightened at a gradual pace.

The bank stated that the risks of a no-deal’ Brexit had fallen sharply while there were slight downward revisions to inflation forecasts. Governor Carney stated growth risks are skewed to the downside, but that the Brexit deal created the possibility of stronger growth. The vote split and more dovish overall guidance triggered Sterling losses.

GBP/USD dipped to 2-week lows near 1.2800 and failed to secure a significant recovery while GBP/EUR held around 1.1600. Sterling remained subdued on Friday despite solid global risk appetite.

Economic Calendar

Expected Previous
07:00 German Trade Balance(SEP) 18.1B 18.1B
07:45 Non-Farm Payrolls QQ - 0.20%
10:00 EU Economic Summit - -
13:15 CAD Housing Starts(OCT) - 221.2K
13:30 CAD Building Permits (M/M)(SEP) -1.00% 6.10%
13:30 CAD Employment Change (M/M)(OCT) 10.0K 53.7K
13:30 CAD Full Employment Change(OCT) - 70.0K
13:30 CAD Unemployment Rate (M/M)(OCT) 5.70% 5.50%
15:00 USD Michigan Consumer Sentiment(NOV 01) 92 93.2

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.