MARKET ATTENTION SHIFTS TO BOE
Monetary policy will continue to hog the spotlight on Thursday as the Bank of England (BOE) meets for the first time since the 8 June election. Although no change in monetary policy is expected, the British central bank could provide clues about future monetary policy amid rising inflation.
The BOE interest rate decision will make its way through the markets at 11:00 GMT. The official rate statement will also be accompanied by the meeting minutes and official vote tallies. It’s expected that seven of the eight Monetary Policy Committee (MPC) members will vote to keep interest rates and quantitative easing on hold. One MPC member is expected to vote in favour of hiking rates.
However, there will be plenty of action leading up to the BOE rate decision. At 07:15 GMT, the Swiss National Bank (SNB) will finalize its monetary policy meeting with a rate announcement. The Swiss central bank is widely expected to keep its main interest rate in negative territory at -0.75%.
The United Kingdom’s Office for National Statistics will report on retail sales at 08:30 GMT. Receipts at retail stores are forecast to decline 0.8% from April, following a 2.3% surge the previous month. In annualized terms, this translates into a 1.7% gain.
At 10:00 GMT, the European Commission’s statistics branch will release the latest trade figures for the month of April. The euro area’s trade surplus is forecast to narrow to €27.2 billion from €30.9 billion.
The US dollar declined against a basket of currencies on Wednesday even after the Federal Reserve raised interest rates for the second time in three meetings.
The euro strengthened modestly on Wednesday, as the dollar backtracked in the wake of the Federal Reserve’s decision to raise interest rates. The outlook on the pair remains bullish amid broad US dollar weakness. Traders should continue to monitor whether a resulting uptrend can finally penetrate the 1.13 handle.
The British pound held remarkably steady during a volatile mid-week session. The GBP/USD exchange rate was last seen trading in the 1.2740 region. The pair managed to advance to the 1.2817 handle during Wednesday’s session. The gains were based almost entirely on the dollar’s weakness. The Wednesday high remains the key zone of resistance for cable over the short term.
Like other currencies, the Swiss franc has benefited from broad dollar weakness in recent weeks. The USD/CHF was last seen trading at 0.9700, having declined roughly 400 pips from the same period a month earlier. In terms of the big picture, the pair faces a major resistance test at parity. A clean break above that level is needed to confirm a bullish reversal, which appears to be out of the question for the time being.