The US Federal Reserve increased interest rates by a further 0.25%. Less Investment coming to UK now??

The US Federal Reserve increased interest rates by a further 0.25%, in line with consensus forecasts and median forecasts suggested two further rate hikes were likely this year.

The dollar initially strengthened, but failed to hold the gains and posted slight net losses as US yields declined and the Euro was supported ahead of the ECB meeting.

Risk conditions were still fragile on trade uncertainties with most global equity markets registering net losses.

Oil prices made net gains after a notable draw in the EIA inventories data while a dollar retreat underpinned gold.

UK May consumer prices rose 0.4% with the inflation rate unchanged at 2.4% and in line with consensus forecasts. The core rate also held at 2.1%, although there was strong upward pressure on producer input prices with a 9.2% annual gain triggered by higher oil prices and Sterling weakness. The data overall increased speculation that the Bank of England would decide against an August rate hike and Sterling lost ground as yields declined with EUR/GBP strengthening to near 0.8820.

The government avoided defeat in another series of House of Commons votes and Sterling regained ground. Uncertainty and concerns surrounding a weak government Brexit negotiating position were still important factors limiting Sterling support amid speculation that the deal to secure support from Conservative Party dissenters was close to breaking.

GBP/EUR closed above 1.1310 and GBP/USD weakened to lows near 1.3320 following the Federal Reserve rate decision before recovering to near 1.3400 as the US currency surrendered wider gains with a UK RICS house-price index of -3 from -7 previously having little impact.