Pound weakens following ‘finely balanced’ BoE rate decision

The pound softened on Thursday as the odds for an August interest rate cut rose in the wake of the Bank of England’s (BoE) latest policy meeting.

Sterling is trading sideways so far this morning, with GBP/EUR muted at €1.1819, and GBP/USD flat at $1.2658. GBP/CAD is rangebound at CA$1.7318, while GBP/AUD and GBP/NZD hold steady at AU$1.8996 and NZ$2.0661, respectively.

Looking ahead, will an impressive UK retail sales print underpin the pound today?

What’s been happening?

The pound ticked lower yesterday in response to the Bank of England’s latest interest rate decision.

As was widely expected, the BoE opted to leave interest rates on hold following its June policy meeting.

However, the bank’s suggestion that the decision was ‘finely balanced’ pulled Sterling lower as it stoked bets that the BoE will start cutting rates in August.

The US dollar, meanwhile, trended broadly higher on Thursday as a prevailing risk-off mood saw investors favour the safe-haven currency.

However, tempering these gains was the latest US jobless claims, as these reported a larger-than-expected increase in new unemployment claims last week.

At the same time, the euro struggled to attract support yesterday, following a larger-than-expected fall in Germany’s latest producer price index.

What’s coming up?

Today’s session kicked off with the publication of the UK’s latest retail sales figures.

May’s figures reported a sharper-than-expected rebound in sales growth, which may lend support to the pound through today’s session.

Any upside in Sterling may be extended later this morning with the release of the UK’s latest PMIs, as an expected uptick in UK service sector growth is likely to be welcomed by GBP investors.

Meanwhile, some mixed PMIs from the Eurozone may trigger some volatility in the euro this morning. While service sector growth in the bloc is forecast to have accelerated this month, another contraction in the manufacturing sector could limit the single currency’s upside potential.

Closing out the session is the publication of the latest S&P Global PMIs. While not as influential as the ISM releases, today’s figures could still buoy the US dollar if they report another healthy expansion of the US private sector this month.