The BoE surprised everyone yesterday as it failed to engage in further stimulus, after it had indicated that it was ready to take action soon after the Brexit vote. Yesterday GBPUSD rose at least 1%, and even the EURGBP experienced a similair move to the downside as the GBP garnered strength in both cases, as the expected stimulus did not materialise.
The GBP had already recovered some of its brexit-induced losses on news that the new PM was sworn into office and the prospect of some political stability eased concerns on Britain’s future challenges. Gains for the GBP continue today.
Earlier this morning we had some important dataa out of China, the world’s second largest economy. Overall retail sales, industrial production and quaterly GDP for the June period showed stability and were actually better than expected numbers. China’s economy grew by 6.7% (Y/Y) for the Q2 period. In fact this morning sentiment remained positive after the US positive handover on equities.
The Aussie, as it tends to do, once again acted as a proxy for the moves in the chinese economy – and was seen peaking to highs of 0.7676 earlier this morning. Given Australia’s economic ties with China, better news out of China was likely interpreted as positive for the Australian economy and hence less need for immediate rate cuts from the RBA. However markets are expecting another rate cut in the short term.
