Forex snapshot

The pound has declined versus the US dollar after the Bank of England revealed that voting in relation to interest rates and the stimulus package has remained the same. The euro is broadly unchanged versus the US dollar as confidence evaporates from the single currency.

Pound coin
Source: Bloomberg

Sterling slips post BoE votes

The pound is trading at $1.7041, down 0.2% on the day as traders were disappointed that not even one of the nine members of the BoE voted in favour of increasing interest rates. Some dealers are anticipating an interest rate rise before the year is out, but the BoE has yet to find one member in favour of tightening monetary policy. Prior to the announcement the pound was eying the $1.71 mark but it quickly gave up that notion and is now at three-day low.

Unemployment in the UK is falling but the wage growth is lagging and this cast doubts over how strong the country’s economy actually is. On Friday the UK will report the preliminary GDP figure for the second quarter; the consensus is for a reading of 0.8%.

Mark Carney is due to speak today at 12.45pm (London time). If he doesn’t dwell on low wage growth too much, I think the pound could recoup its losses. The 50-day moving average of $1.6984 is providing support and the short-term target is $1.7120.

Euro treads water

The euro is trading at $1.3470, meandering between positive and negative territory. It is a worrying sign that the currency has lost a considerable amount of ground to the US dollar in the past two weeks and there hasn’t even been a small correction.

As Alastair McCaig stated yesterday, the euro has set a new low against the US dollar for the year. At 3pm today (London time) the eurozone will report the consumer confidence figures for July. The consensus is for a reading of -6. Soft figures could push the euro towards $1.34 with the $1.3520 level acting as resistance.

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