Spectrum FX Daily Report

GBP:?The British Pound rallied to a new 14 month high against the U.S. Dollar last night as a mixed set of U.S. economic data failed to convince markets that the Federal Reserve was certain to raise interest rates in July. On the other hand, the Bank of England looks set to raise interest rates by a quarter point to a 15-year high of 4.75% on June 22, its 13th straight rate rise as it fights unexpectedly sticky inflation that risks making it a global outlier. In fact, investors this week bet the Bank of England might hike rates as high as 6% this year - well above where the U.S. Federal Reserve or the European Central Bank are expected to go, and a level not seen in Britain since 2000.

EUR:?The Euro seems poised for its best week in months after the European Central Bank raised borrowing costs to a 22-year high yesterday and signalled further rate hikes to come. In fact, the Euro stood near a one-month high against the U.S. Dollar, having surged over 1% yesterday following the rate hike and hawkish forward guidance from the ECB. On that note, ECB President Christine Lagarde stated during her press conference that another rate hike in July was highly likely and that the central bank still has "ground to cover" to stave off high inflation.

USD:?The U.S. Dollar lost further ground yesterday following the release of mixed bag of economic data. In fact, U.S. jobless claims rose by more than analysts were expecting and industrial production numbers undershot, whereas retail sales proved stronger than the consensus was looking for. Yet inflation remains well above the Fed's target and the Fed released guidance that suggested it believed a further two interest rate hikes were appropriate by year-end. However, markets appear reluctant to take this message on board, selling the Dollar and buying stocks, suggesting investors believe the Fed has ended its cycle.

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