The BoE Just Got a Little More Hawkish to Give the Pound a Boost

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, limited to 1^st quarter GDP numbers out of New Zealand and the RBA’s quarterly Bulletin.

For the Kiwi Dollar, the economy grew by 0.5% in the 1^st quarter, which was in line with forecasts, whilst easing from the 4^th quarter’s 0.6%.

Service sector growth was attributed to the growth in the 1^st quarter, led by business services and telecommunications services, with 13 out of 16 industries seeing growth in the 1^st quarter.

Agriculture recovered in the quarter, up 0.4% following a 2.8% fall in the 4^th quarter, supported by a rebound in milk production that came from improved weather conditions.

Weighing on growth was a cool off in the construction sector, according to figures released by NZStats, with construction down 1%, with household spending flat, following a 1.2% rise in the 4^th quarter.

Year-on-year, the economy grew by 2.7% in the 1^st quarter.

The Kiwi Dollar moved from $0.68643 to $0.68635 upon release of the figures before pulling back to $0.685 at the time of writing, down 0.41% for the day.

For the Aussie Dollar, the quarterly RBA Bulletin provided some initial support, with the Aussie Dollar moving from $0.73589 to $0.73648 upon release of the bulletin before rising to $0.7371 at the time of writing, up 0.04% for the day.

Elsewhere, the Japanese Yen was down 0.16% to ¥110.54 against the Dollar, with the Asian equity markets mixed on the day, the Nikkei and ASX200 gaining 0.61% and 0.96% respectively, while the Hang Seng and CSI300 fell by 1.35% and 1.17% respectively, as trade tensions continued to weigh through the day.

The European Session:

For the EUR, there were no material stats released through the morning to provide direction for the EUR, leaving the EUR in the hands of market sentiment towards ECB monetary policy and noise from Italy.

Talks of expelling migrants causing a friction within the coalition government and the continued threat of a trade war, coupled with a dovish central bank weighing on the EUR through the day, the EUR down 0.23% to $1.1545 at the time of writing

For the Pound, while there were no material stats released out of the UK, the Pound got a boost from a more hawkish than expected BoE Monetary Policy Committee, with a 3^rd vote in favour of a rake hike driving the Pound through to $1.32 levels.

With the 3^rd vote coming from the Bank’s chief economist Andrew Haldane, there’s some power behind the vote, with the bank stating that inflation is expected to pick up slightly more than projected in May in the near-term, attributed to rising oil prices and a weaker Pound.

While the markets had written off a near-term rate hike, the 3^rd vote in favour and shift in sentiment towards inflation further muddies the waters, with economic indicators out of the UK having been mixed of late.

At the time of writing, the Pound was up 0.36% to $1.322, the MPC vote pulling the Pound back from earlier in the day losses.

Across the Pond, key stats were limited to the weekly jobless claims and Philly FED Manufacturing PMI numbers for June.

While the initial jobless claims came in better than expected, falling from a revised 221k to 218k. Of greater influence was the Philly FED Manufacturing PMI for June, which fell from 34.4 to 19.9, the only positive being a slight uptick in the employment sub-index, which rose from 30.2 to 30.4.

The EUR/USD moved from $1.15441 to $1.15717 upon release of the figures, which showed that the new orders index tumbled by close to 23 points to 17.9, with sentiment towards the sector over the coming 6-months also in reverse.

At the time of writing, the Dollar Spot Index was up just 0.01% to 95.129, easing back from a morning 95.529 high, weighed by today’s stats.

Across the border, the Loonie was on the move, gaining 0.36% to C$1.3302 at the time of writing, with a pullback in the Greenback providing much needed support, economic data out of Canada limited to April wholesale sales that rose by 0.1%, well short of a forecasted 0.4% and March’s upwardly revised 1.4% rise.