GBP

Sterling has managed to hold on to yesterday’s gains in early trading, underpinned by comments from Huw Pill, the Bank of England’s chief economist. In an interview with the Western Mail newspaper, the economist said that he believes more interest rate hikes are needed, adding that there was a balancing act the Monetary Policy Committee had to perform. He said that too little action on interest rates might allow inflationary pressures to become embedded in the economy, while moving too aggressively there was a danger of stifling economic growth. The Confederation of British industry’s (CBI) quarterly survey of services companies released this morning showed that confidence is draining away from the services firms that dominate the UK’s economy, especially in consumer-facing companies which are most exposed to the worsening cost of living crunch. Consumer services companies reported that growth was at a standstill and expected it to fall in the coming quarter.

EUR

The euro has lost some momentum gained over the last few days against the dollar. The single currency had been underpinned by expectations that the European Central Bank will begin a rate hike cycle in July. Bolstering market expectations, European Central Bank governing member and Dutch Central bank Chief Klaas Knot said in an interview with CNBC that a half -point interest rate hike remains an option and he noted that officials will get another two inflation readings before the July meeting, which has been billed as the moment the central bank will raise rates for the first time in eleven years.

USD

The dollar index hovered near a one month low in early trading, after the minutes from the federal Reserve Bank’s May meeting confirmed the potential for a pause in rate hikes after the likely increases in June and July. Analysts said there was nothing in the minutes to suggest a further ramp up of the Fed’s already hawkish stance. Earlier this week, Atlanta Fed President Raphael Bostic had already suggested that a pause might be the best course of action in September to monitor the effects on the economy following two more 50 basis point hikes at their next two meetings. Later today, the US Bureau of Economic Analysis will release its second estimate of the first quarter GDP growth

Economic Calendar

13.30 USD Core Personal Consumption Expenditures
13.30 USD Gross Domestic Product (O1)
12.30 USD initial Jobless Claims