Comments from Fed officials suggest strong support for an interest rate cut at July meeting.
US CPI inflation data was slightly stronger than expected with the core annual rate at 2.1% from 2.0% which provided initial dollar support.
Comments from numerous Fed officials still suggested strong majority support for an interest rate cut at the July meeting.
The dollar was able to secure only a limited net recovery given the Fed rhetoric and retreated again on Friday amid weaker sentiment.
Demand for defensive assets faded slightly as global bond yields moved higher with a very weak US Treasury auction adding to upward pressure on yields.
Commodity currencies pushed higher on Friday, supported by US weakness with the Euro also resilient.
Gold retreated as the dollar staged a limited recovery and demand for defensive assets faded. Oil prices were resilient amid underlying Middle East tensions.
The Bank of England Financial Stability Report stated that the perceived likelihood of a ‘no-deal’ Brexit was perceived to have risen since the beginning of the year. Governor Carney, however, reiterated that the banking sector was able to cope with Brexit uncertainty and the risks of a ‘no-deal’. There were no major market-moving domestic developments during the day.
Underlying Sterling sentiment remained fragile amid on-going economic and political concerns. Markets will monitor next week’s data releases closely to assess whether the domestic labour-market and inflation indicators are liable to push the Bank of England towards a more accommodative monetary policy.
GBP/EUR found support at 1.1100, but gains were limited while GBP/USD failed to hold above 1.2550. Expectations of Fed and ECB rate cuts provided an element of Sterling protection, especially given a heavy short position, with the currency fractionally higher on Friday.
|09:00||Monthly Oil Market Report||-||-|
|09:30||BoE MPC Member Gertjan Vlieghe Speaks||-||-|
|10:00||Euro-Zone Industrial Production (M/M)(MAY)||-0.50%||-0.50%|
|10:00||Euro-Zone Industrial Production (Y/Y)(MAY)||-0.50%||-0.40%|
|13:30||USD PPI Ex Food & Energy (Y/Y)(JUN)||2.30%||2.30%|
|13:30||USD PPI Ex Food & Energy (M/M)(JUN)||0.20%||0.20%|
|13:30||USD PPI (M/M)(JUN)||0.10%||0.10%|
|13:30||USD PPI (Y/Y)(JUN)||2.00%||1.80%|
|18:00||USD Baker Hughes US Oil Count||-||788|