Tuesday’s economic calendar was another quiet one with only a few releases worth noting. UK mortgage approvals took a small dip from 42.2k in April to 41.8k in May, although this was slightly above the forecast figure of 41.3k. Whilst these figures are still positive for the housing market, it was the inflation hearing before the Treasury Select Committee that moved the currency markets. The BoE governor Mark Carney presented a slightly more Dovish speech that those in recent weeks as he expanded on his previous comments about future UK interest rate hikes. Mark Carney advised that the timing of the first hike would still be data dependant but most important was that any hikes would be limited and very gradual. He admitted concerns over recent wage data that has been softer than expected despite the strong pace of job creation in the UK.
The pound suffered a tough day following these comments as it slipped around 0.5% against most majors, a move that could very well signify and trigger the beginning of a correction in exchange rates over the coming weeks. Cable rates dropped through key support levels as the greenback was boosted by New Home Sales figures and better than forecast consumer confidence.
Today is another very quiet day for data so expect to see more of the same. At 1:30pm we will have the main release of the day which is US GDP figures, which analysts are expecting a sharp drop from 2.6% growth to a 1.7% contraction. A host of other US data at the same time is likely to see a volatile afternoon for GBP/USD.