Tightening Back on the Agenda

Global coordinated monetary policy tightening is back in play after a hawkish shift and the BOE and a bump in US fortunes. The pound soared after the MPC while the New Zealand dollar lagged. The Asia-Pacific calendar is light later but there are rumors of a North Korean launch. Our Premium long in GBPUSD hit its final target for 230 pip gain. 

The MPC said some withdrawal of stimulus is likely in the coming months in a move that came as somewhat of a surprise. The pound climbed 150 pips on the headlines and added another 50 when Carney revealed he too thinks the possibility of a hike has “definitely increased.” Cable ran to 1.3400 in a fresh cycle high and finished at the best levels of the day.

The US dollar caught a bid early in the day after CPI rose 1.8% compared to 1.7% expected. Not long after the data, the questions started to mount. Wage numbers were soft and it appeared inflation was boosted by an unusual jump in shelter prices.

Chatter about a weak retail sales report on Friday also did the rounds, in part due to skews from Hurricane Harvey. Finally, Mnuchin sounded a worried note no growth late in the day that contributed to USD/JPY selling down to 110.25 from a high of 111.04.

Finally, Bitcoin fell 13% after China announced it will shut all local exchanges by the end of the month. It last traded at $3348.

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