With the US on holiday today for Independence Day price action in currency markets has so far been pretty quiet. EUR/USD still refuses to budge from around the 1.165 level while GBP/USD is struggling to edge higher from 1.32 despite the decent rise in the composite PMI to in June (not to mention England’s victory against Colombia last night to take them to the quarter finals of the football world cup).
The up-tick in the composite PMI in Q2, which has been mostly driven by an improvement in the important UK services sector, suggests that GDP growth may have picked up to 0.3-0.4% quarter-on-quarter in Q2 from a meagre 0.2% in Q1. This would in turn increase the probability of the Bank of England hiking its policy rate 25bp from 0.50% at its August policy meeting.
Nevertheless markets at this juncture seem more focused on issue of Brexit and in particular the cabinet meeting scheduled for Friday 6thJuly and promised publication of a more detailed post-Brexit plan.
