Article Highlights

  • BOE kept interest rates on hold at 0.50% for now
  • U.S. headline PPI up 0.5% vs. 0.3% forecast
  • U.S. core PPI up 0.4% vs. 0.1% forecast
  • U.S. initial jobless claims at 254K vs. 263K consensus
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The U.S. session kicked off with a lot of strong moves thanks to the BOE decision, but traders soon calmed down and allowed dollar pairs to consolidate.

Major Events:

BOE decision aftermath – In my London session recap, I’ve shared with y’all how the BOE surprised several market participants by deciding to keep interest rates on hold for the time being. However, profit-taking from the GBP rallies swiftly took place as traders realized that this simply ups the odds for a BOE rate hike in their August meeting.

A closer look at the minutes of the MPC meeting reveals that policymakers discussed a range of potential easing tools, which suggests that they’re pretty serious about doling out more stimulus but that they needed time to go over their options first.

U.S. economic reports – Data from the U.S. economy came in stronger than expected, both on the jobs and inflation fronts. Headline PPI rose 0.5% versus the projected 0.3% gain while core CPI showed a 0.4% increase, outpacing the estimated 0.1% uptick. Initial jobless claims came in at 254K versus the 263K consensus, indicating positive momentum in the labor market.

FOMC member Bullard acknowledged that the Fed is achieving its goals on inflation and hiring but emphasized that the central bank is in no rush to hike interest rates. He added that he prefers to wait for good economic news before voting to tighten and that they might still do so at least once this year.

Major Currency Movers:

GBP – The British pound was still rallying by the time U.S. session traders reached their trading desks but the currency soon returned some of its recent gains.

GBP/USD retreated from a high of 1.3479 to a low of 1.3277 before moving sideways, GBP/JPY topped at 142.13 then dropped to a session low of 140.09, EUR/GBP hit a low of .8254 then pulled back up to the broken support at .8350, GBP/AUD fell from a high of 1.7616 to a low of 1.7415, and GBP/NZD is down to the 1.8450 area.

EUR – The euro followed in the pound’s footsteps and rallied against its forex peers, only to give up some of its recent gains as well.

EUR/USD reached a high of 1.1166 before turning back to a low of 1.1102, EUR/JPY peaked at 118.03 then turned back down to a low of 116.68, EUR/AUD continued to tread carefully below the 1.4600 handle, EUR/NZD surged to a high of 1.5496 then pulled back, and EUR/CAD is testing support at 1.4300.

Watch Out For:

  • 3:00 am GMT: Chinese Q2 GDP (6.6% expected, 6.7% previous)
  • 3:00 am GMT: Chinese industrial production y/y (5.9% expected, 6.0% previous)
  • 3:00 am GMT: Chinese fixed asset investment ytd/y (9.4% expected, 9.6% previous)
  • 3:00 am GMT: Chinese retail sales y/y (9.9% expected, 10.0% previous)

See also:

Asian Session Recap

London Session Recap

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