Daily Analysis | Clear Treasury

Our daily analysis of EUR, GBP and USD.

GBP

The doves are out at the BoE – the MPC voted to leave rates unchanged at 5.25% yesterday, however 2 members voted to cut rates whilst 7 members voted to leave rates unchanged.
The vote was a sign that the tide is changing with regards to underlying inflationary pressures and the central bank is gaining confidence as a result of ‘encouraging news’ on inflation. BoE governor Andrew Bailey commented ‘it’s likely we will need to cut bank rates over the coming quarters…possibly more so than currently priced into market rates’.
Bailey reaffirmed the decision would still be data dependent and would ‘consider forthcoming data releases’. A reference to inflation and jobs data being released before the next meeting on June 20th.
A data set that would be welcomed by both the BoE and Rishi Sunak is this morning’s GDP release, QoQ figures reported the UK came out of the technical recession the economy fell in in the second half of 2023.
- QoQ GDP figures rose to 0.6%, above the 0.4% forecast and climbing out of the negative territory of -0.3% we saw in Q4.
- YoY figures posted a reading of 0.2% versus 0% forecast.
Manufacturing Production for March exceeded the -0.4% estimate with a reading of 0.3%.
Industrial Production followed suit as figures rose came in at 0.2% versus -0.5% forecast.
A positive 24 hours for the UK economy has translated in Sterling strength. GBP/USD trades back above 1.2520 after dipping into 1.24 handle ahead of the BoE meeting.

Central banks deviating from the Federal Reserve has been the theme of the week as US inflation proves stickier than first thought.
Initial Jobless Claims released yesterday came in above the 210k forecast at 231k.
Michigan Consumer Sentiment Index for May released at 3pm.
Monthly Budget Statement for April released at 7pm.
Host of Fed members speak today including Michelle Bowman, Neel Kashkari, Lorie Logan, Austan Goolsbee and Michael Barr.
EUR/USD traded higher throughout yesterday’s afternoon trading session, testing the 1.08 barrier this morning.

Riksbank cut interest rate this week, becoming the first central bank to turn over the dovish side since the pandemic. Erik Thedeen has warned the US are ‘outperforming Europe, including Sweden-the productivity growth in the US has been much stronger. That is very important for European policymakers to try to address’. Comments come as Thedeen fears Sweden and Europe will lose out on more growth if the issue is not managed.
ECB Monetary Policy Meeting Accounts released at 12:30pm.
EURGBP continues to trade sideways at 0.8600.

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