US June rate hike unlikely

Wednesday’s trading was another positive one for GBP/EUR with rates hitting their peak levels once again. This has been largely due to the Euro weakening following news that the ECB are set to front load their bond buying programme in the coming months. Sterling was able to shake off any negativity from the Bank of England minutes that again provided a unanimous decision to hold interest rates at the record low of 0.5%, but with 2 members finely balanced on this decision as with last month. With inflation expected to remain around zero for the coming months, interest rate changes are not expected in the UK until spring 2016. Sterling made small gains across the board recovering some of the losses in recent days.

The main announcement of the day was not until after UK trading with the FOMC minutes released from the US at 7pm. In these minutes it was detailed that only a few of the members supported a June rate hike whilst most felt that economic data was unlikely to support this but whilst not completely ruling it out. Members also discussed an increased uncertainty about the economic outlook and commented that the strong USD is likely to continue to restrain exports and growth for some time. The US do however still remain in the front seat to be first major economy to start raising rates since the recession. As this stance was of no real change to last month there was little effect on USD exchange rates.

Today we have a number of economic data releases starting with Euro-zone Services and Manufacturing PMI figures at 9am. Shortly after the focus switches to the UK at 9:30am with April’s retail sales figures where a small contraction is expected from the excellent figures produced last month. The afternoon will bring a string of smaller US announcements between 1:30pm-3pm with Euro-zone consumer confidence rounding off the day’s data at 3pm.