The British pound has recorded gains on Friday, erasing the losses seen in the Thursday session. In the North American session, GBP/USD is trading at 1.3564, up 0.34% on the day. On the release front, there are no British events, after a very busy Thursday. In the U.S, the markets are expecting UoM Consumer Sentiment to improve to 98.4 points.
The pound showed little movement on Thursday, as the Bank of England held the benchmark interest rate at 0.50 percent. As expected, two of nine MPC members voted for an immediate rate hike. In the BoE inflation report, policymakers noted concern over softness in consumer borrowing and the housing market. The markets were not surprised by the BoE decision, given the fact that first-quarter growth was just 0.1% and consumer spending an inflation levels weakened. On Friday, there was no relief from the NIESR GDP Estimate, which indicated a 0.1% expansion of the economy in April. Will economic growth rebound in the second quarter? Policymakers are adopting a wait-and-see attitude towards rate hikes, with any increase unlikely before August, which is when the next inflation report will be released.
Key U.S indicators were mixed on Thursday. Unemployment claims impressed, remaining unchanged at 211 thousand. This easily beat the estimate of 219 thousand. The US labor market is at near or full employment, which has resulted in a slowdown in job growth due to a shortage of skilled labors. Earlier in the week, JOLTS Job Openings climbed to a record 6.6 million. At the same time, inflation levels remain low, as the Federal Reserve target of 2 percent remains elusive. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. Inflation levels will be an important factor for the Fed in its monetary policy projection, which remains at two more hikes in 2018. According to the CME Group, the odds that the Fed will press the rate trigger at the June meeting stand at 100%.
