Pound Declines As BoE Bailey Dismisses Inflation Concerns
July 01 2021 - 4:08AM
RTTF2
The pound dropped against its major counterparts in the European
on Thursday, after Bank of England Governor Andrew Bailey
downplayed the possibility of a premature tightening of monetary
policy, saying that policy makers should not exaggerate a temporary
surge in inflation taking hold in the U.K.
The central bank should not overreact to temporary strong growth
and inflation in order to ensure that the recovery is not
undermined by a premature tightening in monetary conditions, Bailey
said in his annual Mansion House speech.
The BOE chief noted that part of the recent spike in inflation
was driven by statistical comparisons with the previous year and
supply constraints following the reopening of the economy.
Bailey confirmed the bank's forecast for inflation to exceed 3
percent for a temporary period and then falling back toward the
bank's target next year.
Final survey results from IHS Markit showed that the UK
manufacturing sector logged a strong growth in June but the pace of
expansion moderated from a record high.
The Chartered Institute of Procurement & Supply
manufacturing Purchasing Managers' Index dropped slightly to 63.9
in June from May's record high of 65.6. The reading was below the
flash estimate of 64.2.
The pound weakened to a 2-1/2-month low of 1.3765 against the
dollar, down from yesterday's close of 1.3828. Should the pound
dips further, 1.36 is possibly seen as its next support level.
The pound retreated to 153.42 against the yen, from a 3-day high
of 153.97 seen at 4 am ET. The pound is seen facing support around
the 148.00 level.
After rising to a 1-week high of 1.2817 at 4 am ET, the pound
edged down to 1.2740 against the franc. The pound is likely to find
support around the 1.25 region.
Preliminary data from the Federal Statistical Office showed that
Switzerland's retail sales increased in May.
Retail sales adjusted for sales days and holidays grew by 2.8
percent year-on-year in May.
The pound fell to more than a 2-week low of 0.8616 against the
euro, from a 6-day high of 0.8564 set at 4 am ET. Next key support
for the pound is likely seen around the 0.88 level.
Final data from IHS Markit showed that the euro area
manufacturing sector grew at a fresh survey record pace for a
fourth successive month in June as demand surged with the further
relaxation of containment measures.
The final manufacturing Purchasing Managers' Index rose to 63.4
in June from 63.1 in May. The final reading was higher than the
flash 63.1.
Looking ahead, U.S. weekly jobless claims for the week ended
June 26, ISM manufacturing PMI for June and construction spending
for May are set for release in the New York session.
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