Pound Softens Ahead of Bank of England Policy Decision


The British pound weakened against rivals ahead of Bank of England's monetary policy decision. The bank is widely expected to keep interest rates unchanged at a historically low level of 0.10%, but increase its assets purchases program by around 100 billion pounds to support fast economic recovery. The latest economic data showed that the UK economy shrank by 20% in April due to the Coronavirus lockdown. Currently, the GBPUSD is trading near $1.2525, and the EURGBP at a high of 0.8985.


The dollar index, which measures the greenback against a basket of major currencies, settled firmer at 97.08, supported by increased demand for safety as Coronavirus cases spiked. A rise in cases in different states and Beijing's lockdown measures revived fears of having a lockdown again due to a serious breakout. On the other hand, market participants were assessing Powell's two-day monetary policy testimony where he confirmed that full recovery would take time, but signaled that the Federal Reserve would taper its assets purchases if the economic activity picked up rapidly.


Major US stock index futures were slightly softer amid growing fears of a second round of coronavirus infections. Texas reported an 11% surge in hospitalization for COVID19 patients, and Arizona filed a record confirmed cases for a single day. Investors are afraid that a severe outbreak could lead to an economic shutdown one more time. The Dow Jones Industrial Average futures eased to 25616, the S&P500 futures dropped to 3063, and Nasdaq futures declined to 9865.


Precious metal prices continued to trade sideways, awaiting fresh fundamental drivers. The price of a gold ounce is hovering around $1725, the price of a silver ounce inched higher to $17.60, and palladium futures held steady above $1930.


Oil prices were almost steady as investors continue to assess the fresh coronavirus developments. Market participants are afraid of another lockdown that could hit oil demand levels again, but US officials stated on several occasions that they are not willing to lock down the country. On the other hand, the US Energy Information Administration reported a buildup of 1.215 million barrels in crude inventories. The West Texas Intermediate August delivery inched higher to 38.26, and Brent blend August delivery ticked higher to $40.91.

Major Economic Events

GMT Country Event Expectation Previous
8:30 EZ  ECB Economic Bulletin  - -
11:00 UK  BoE Interest Rate Decision (Jun) 0.10% 0.10%
11:00 UK  BoE QE Total (Jun) 745 645
12:30 US  Initial Jobless Claims 1295 1542
12:30 US  Philadelphia Fed Manufacturing Index (Jun) -25 -43.1


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