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14.07.2016 12:25

European session review: the pound rose sharply after Bank of England hold rates

The following data was published:

(Time / country / index / period / previous value / forecast)

Switzerland 7:15 producers and import price index m / m in June 0.4% 0.2% 0.1%

7:15 Switzerland PPI and import, y / y in June -1.2% -1%

11:00 UK Bank of England Interest Rate Decision 0.5% 0.25% 0.5%

11:00 UK Bank of England's decision in terms of assets purchase program 375 375 375

11:00 UK Bank of England Minutes of the meeting

The yen depreciated considerably against the dollar and came close to the psychological level of Y106.00. The main reason for the weakening of the yen were the statements of Japanese politicians. Initially, Prime Minister Abe adviser Hamad pointed out that the need for action by the Bank of Japan depends on the recovery of the stock market and the decline of the yen by 29 July. "Now I can not say with absolute certainty whether the Bank of Japan will soften the policy on July 29 as reduction of supply and growth in demand in the labor market means that there is no need to discuss easing policies at every meeting." - said the politician.

Honda added that the Bank of Japan does not need to further dig deeper into negative territory rates, as it may intensify concerns about the banking system. In addition, Honda has paid attention to the exchange rate of the national currency, saying that a weak yen helps fight deflation. In addition, he said that he wants to see even a small declin in the yen.

It is worth emphasizing, the markets are priceing in the likelihood of further easing by the Bank of Japan on the monetary policy meeting on July 28-29, as evidenced by the fall in the yield of Japanese government bonds.

A certain pressure on the yen continues to have the sharp revision of forecasts for GDP and inflation. Explaining this decision, the Government pointed to the a increase in uncertainty about the global economy, weak domestic consumption and sluggish investment.

The pound rose against the dollar significantly, updating the maximum of the current month. The main support to the currency was provided by results of the Bank of England meeting. Despite forecasts, the Central Bank decided to leave the interest rate unchanged at 0.5%. The minutes of the meeting noted that the number of votes cast in favor of keeping the key was 8, and the number of votes cast in favor of raising the key rate, amounted to 1. Also in the report it was said that most members of the Committee are expected easing in August. "The committee members previously discussed the different possible packages of measures, but the degree of additional incentives will depend on the August forecasts and need a detailed analysis of all the policy options.", - reported in the minutes. "Economic activity is likely to weaken after the referendum. Recently uncertainty revealed a sharp drop in household confidence indicators and the business community, however, some companies have postponed investment and personnel decisions".

Positive impact on the pound have also had statements by the new British Chancellor Philip Hammond. He said he would do whatever is necessary to stabilize the economy and give confidence to the financial markets after the British voted for Brexit. Hammond said that the country does not need an emergency budget, and added that the government will monitor the economic situation during the summer before the announcement of the fiscal plans in the autumn statement.

The dollar fell against the euro, approaching to a minimum on 5 July. Against the background of an empty calendar for the euro area on the bidding affect risk appetite. In addition, the euro was guided by the dynamics of the pound, which today is the main topic of discussion .

EUR / USD: during the European session, the pair has risen to $ 1.1165

GBP / USD: during the European session, the pair rose to $ 1.3476

USD / JPY: during the European session, the pair rose to Y105.86

14.07.2016 11:50


Market Focus

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