Trade Tensions And Approaching Quarter-End Cast Pall Over Markets

The BOE's McCafferty, a dissenting hawk, sticks to his knitting in what may be his last remarks before stepping down. McCafferty warns that the UK economy may be rebounding and sees a significant risk that inflation stays about its target. Haskel, who will replace him, agrees there is little scope for lower rates but identifies potential slack in the labor market. Haskel identifies his views as consistent with the BOE's broad direction of interest rates--modest rise is needed in the medium term. There is no discussion of the immediate term and the outlook for the August 2 MPC meeting (Haskel will not vote) where the market has discounted a nearly 70% chance of a hike. It had dipped below 50% before last week's hawkish hold. 

At roughly $1.3210, sterling retraced 50% of the rally spurred by the BOE. It has traded on both sides of yesterday's range. A close below $1.3220, yesterday's low would be a poor sign. The 61.8% retracement is found a little below $1.3185. 

The Canadian is trading quietly inside yesterday's range. The Australian dollar has slipped through yesterday's lows but may find support ahead of $0.7375. 

The North American data stream is light. The US reports include house prices, Richmond Fed survey, and the Conference Board's consumer confidence measures. The Fed's Bostic and Kaplan speak in the afternoon (ET). 

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Read more by Marc on his site Marc to Market.

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