US$ stays balanced against major peers after mixed bag of data. BOE stays put, but talks further cuts

USD

The U.S. Dollar is trading in quiet ranges following non-action by the Bank of England and a mixed bag of economic figures domestically. Retail Sales in the U.S. contracted (-0.1%) as a whole instead of expanding by 0.3% as expected. On the other hand, Producer Price Index fell in line with the forecast expanding 1.0% year-over-year. The Philadelphia Business Outlook expanded, but New York’s manufacturing contracted more than previously thought.

Labor remains a pillar of economic health as both Initial and Continuing Jobless Claims continued to head downward. As we speak (type, read), the greenback is gaining back any minor losses experienced earlier.

Consumer Price Index and Consumer Sentiment will close out the week tomorrow. As markets find direction following the BOE’s decision and dovish commentary, we see potential for the dollar to appreciate further prior to next week’s Federal Open Market Committee meeting announcement.

JPY

The Japanese Yen rose overnight based on weakness of domestic stocks as well as an ongoing decline in Asian markets. MSCI Asia Pacific Index is down 2.0% this week and Japan’s Topix Index dropped another 1.0% yesterday, making it a seventh consecutive day of losses.

The uncertainty over Japan’s fiscal and monetary situation is spreading fear of recession and the prospect of interest rates further into negative territory is turning off many investors. Yen is staying buoyant primarily because of its safe-haven status, not much else.

GBP

The Pound depreciated as a result of the Bank of England’s commentary following its policy decision. As we predicted, the central bank remained committed to its already-expanded stimulus purchases and left rates at the record-low agreed in August.

However, members pointed out the need to stay focused on inflationary growth obstacles and the need to alleviate lackluster growth with the aid of accommodative interest rates.It seems like the BOE is willing to cut rates down further in order to avoid any recessionary pressures and foster business activity as well as investment that may be at peril following the Brexit vote.