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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