The Pound declined against the Euro while making gains against the Dollar after the release of retail sales indicated a fall in May. The Bank of England is expected to expand its long-term funding mechanism next month and will incorporate a two-tier auction system that accepts a wider array of collateral to address stresses in the financial system. Also to note Chancellor of the Exchequer Osborne stated the new Cameron government hopes to decrease fiscal spending by at least £6 billion in what would be an abrupt shift from the policies of former Prime Minister Brown.
The Dollar declined against the Euro and the Pound yesterday after the release of the second estimate of Q1 2010 GDP came in below expectations at 3.0 percent which has decreased investors expectations slightly that the Fed will increase the base interest rates this quarter. In other news, US jobless claims decreased to 4,607 from 4,656 for the week ending May 15.
The Euro made gains against the Pound and the Dollar after officials from China and Kuwait reiterated that they will continue to maintain currency reserves in the single currency. South Korea’s central bank also said that it has no pans to reduce euro assets in its foreign reserves, which are reported to be the sixth largest in the world. Despite yesterday’s move the euro still faces downside risks due to lingering concerns about sovereign and bank credit risks, as well as the prospect of ECB interest rates on hold for longer all point to a weak euro over the medium term.
Data released 28th May
US 13.30 Personal Income (April)
Consumption
Core PCE
US 14.45 Chicago PMI (May)
US 14.55 Michigan Sentiment (May Final)
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