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The Bank of England caught traders off-guard on Thursday, turning what was expected to be a rather mundane affair into something far more interesting, as two policy makers joined Kristin Forbes in voting for a rate hike.

That took the vote to 5 to 3 in favour of no change which is dramatically closer than markets had anticipated. The belief prior to today's meeting was that we'll be waiting until at least 2019 for a rate hike and that policy makers will look through temporary spikes in inflation in the meantime, in favour of supporting the economy. The minutes suggested something very different though, instead suggesting that continued employment growth could suggest space capacity and the central banks tolerance of above-target inflation is being eroded.

While sterling did rally on the news, it has so far failed to break 1.28 against the dollar, having traded around 1.27 prior to the release. While it may still break above there today, it would appear that traders are refusing to overreact to the minutes and there are some good reasons why. The most obvious is that Forbes is leaving the BoE at the end of the month, reducing the number of those favouring a hike - and possibly the most hawkish - by one. With the economic outlook still challenging, wage growth will likely remain weak which should act as a drag on longer term inflation once the currency impact passes, assuming we don't see further dramatic shifts lower in sterling.

The one thing that today's announcement will achieve is that markets will be less complacent going into future meetings and while the BoE may refrain from raising interest rates, should they feel they have to, the markets should be somewhat prepared.

USD/CAD has seen a substantial 3.65% slump since May 5th.

The FOMC made a hawkish statement on Wednesday evening, June 15th, resulting in a sharp rebound of USD and USD/CAD.

As a result, the USD/CAD downtrend was held above the short term major support level at 1.3200, after hitting a 3-and-a-half-month low of 1.3164,

There is stronger support at the level at 1.3200, we will likely see an ongoing rebound as a correction post a slump.

On the 4-hourly chart, the price has been moving from the lower band to the middle band by the Bollinger Band indicator, suggesting increased bullish momentum.

The daily Stochastic Oscillator reading is below 20, suggesting a rebound.

The resistance level is at 1.3300, followed by 1.3350.

The support line is at 1.3250, followed by 1.3200.

The US initial jobless claims (the week ending June 9th) will be released at 13:30 BST this afternoon. Be aware that it will likely affect USD and USD/CAD.

EURUSD

The EURUSD attempted to push higher yesterday, slipped above 1.1285 but whipsawed to the downside and closed lower at 1.1217. As long as stay above 1.1080 I remain bullish, but we may have a false breakout bearish pullback scenario as you can see on my H4 chart below. The bias is bearish in nearest term testing 1.1160. A clear break below that area could trigger further bearish pressure testing 1.1080 key support which remains a good place to buy with a tight stop loss. On the upside, we need a clear break above 1.1285 to continue the bullish scenario testing 1.1350 – 1.1425 region.

GBPUSD

The GBPUSD was indecisive yesterday. Price slipped above 1.2780 key resistance but closed lower at 1.2750. The bias is neutral in nearest term probably with a little bearish bias testing 1.2700 area. A clear break below that area could trigger further bearish pressure testing 1.2635 key support. The pin bar bullish scenario should remain valid but need a clear break above 1.2780 key resistance to confirm the bullish scenario targeting 1.2900 – 1.3000/50 region. On the downside, a clear break below 1.2635 would nullify any bullish scenario targeting 1.2500 area.

USDJPY

The USDJPY attempted to push lower yesterday bottomed at 108.82 but closed higher at 109.57. The bias is neutral in nearest term probably with a little bullish bias testing 110.35 area but as long as stay below the trend line resistance I remain bearish targeting 108.00 region and any upside pullback should be seen as a good opportunity to sell. Immediate support is seen around 109.25. A clear break below that area could trigger further bearish pressure retesting 108.80 region.

USDCHF

The USDCHF was indecisive yesterday. The bias is neutral in nearest term but as long as stay below 0.9815 I remain bearish and any upside pullback should be seen as a good opportunity to sell. Immediate support is seen around 0.9650 followed by 0.9600. Immediate resistance is seen around 0.9735. A clear break above that area could trigger further bullish pressure testing 0.9815 which is a good place to sell with a tight stop loss.

The DAX index has posted considerable losses in the Thursday session, dropping 1.04 percent. The index is currently at 12,684.50 points. On the release front, the eurozone trade surplus dropped sharply, coming in at EUR 19.6 billion. This was well short of the forecast of EUR 22.4 billion. On Friday, the eurozone releases Final CPI, which is expected to drop to 1.4 percent.

The ECB has indicated it is in no rush to change its ultra-loose monetary policy, despite better economic conditions in the euro-area. However, a major player has long been unhappy about this, and the complaints are getting louder. Germany wants to see a tighter policy out of Brussels, arguing that the current low-interest environment is hurting savers and is ill-fitted to Germany’s strong economy. On Tuesday, German finance minister Wolfgang Schaeuble called on the ECB to change its policy in a “timely manner”. For its part, the cautious ECB has argued that it must keep its asset -purchase program and low interest rates in place while inflation remains at low levels. However, with Germany facing elections in September, the pressure on the ECB to tighten policy will only increase, especially if economic indicators continue to points upwards.

The US released key consumer indicators on Thursday, and the readings disappointed the markets, as CPI and retail sales reports missed estimates. CPI declined 0.1%, short of the estimate of 0.2%. This was the second decline in three months, as inflation is currently at 1.5%, well below the Federal Reserve’s target of 2.0%. Retail Sales, the primary gauge of consumer spending was dismal, coming in at -0.3%, compared to a forecast of +0.1%. This marked the indicator’s weakest reading since August 2016. Weak retail sales is clearly an area of concern – the soft reading could drag down GDP for the second quarter, as as consumer spending accounts for more than two-thirds of economic growth. Although surveys continue to show that US consumers remain optimistic about the economy, this hasn’t translated into stronger consumer spending.

The markets had priced in a rate hike at close to 100%, and the Federal Reserve complied, as it hiked rates on Thursday by 25 basis points, to a target range of 1.00 percent to 1.25 percent. The rate statement was more hawkish than expected, as policymakers portrayed an optimistic picture, noting that the economy was growing and the labor market remained strong. As for inflation, which remains stubbornly low, the statement acknowledged that inflation remained below the Fed’s target of 2.0%, but expected that goal to be reached in the “medium term”. The Fed projected one more rate hike in 2017, and the markets are circling the December meeting as the most likely date. The odds for a September hike are at 18%, down from 23% a week ago, according to the CME Group. As for a December increase, the odds are currently at 38%. One surprising development was that Fed Chair Janet Yellen outlined a plan to reduce its $4.2 trillion balance sheet (comprised of Treasury bonds and mortgage-backed securities). Yellen was short on specifics, saying that the goal was to begin the normalization “relatively soon”. The balance sheet ballooned after the financial crisis in 2008, as the Fed implemented a massive quantitative easing program as part of its accommodative monetary policy, together with interest rates of zero. The gradual reduction in the purchase of these assets signifies an important vote of confidence in the strength of the US economy.

The BOE ( Bank Of England ) will decide today about their interest rates and the event should provide huge volatility in the GBP currency basket. The BOE's MPC meeting minutes provides the result of the interest rate vote for each MPC member during the most recent meeting.

The GBP/USD is currently trapped in a rectangle range and the breakaway gap hasn't been closed yet. During my yesterday's live trading webinar the GBP was very volatile but eventually dropped and turned trade into the profit. However, today the movement might be two fold, that's why we should pay attention to potential breakouts. If the pair spikes above 1.2825 next resistance is 1.2845 and if it proceeds above we might see 1.2930-40. The bottom of the gap is very close to W H4 so the gap might be closed. On the contrary, if the pair drops below 1.2634 next target could be 1.2550.

The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 14 June 2017, the MPC voted by a majority of 5-3 to maintain Bank Rate at 0.25%. The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.

The MPC set out its most recent assessment of the outlook for inflation and activity in the May Inflation Report. That assessment depended importantly on three main judgements: that the lower level of sterling continues to boost consumer prices broadly as projected, and without adverse consequences for inflation expectations further ahead; that regular pay growth remains modest in the near term but picks up significantly over the forecast period; and that more subdued household spending growth is largely balanced by a pickup in other components of demand.

CPI inflation has been pushed above the 2% target by the impact of last year's sterling depreciation. It reached 2.9% in May, above the MPC's expectation. Inflation could rise above 3% by the autumn, and is likely to remain above the target for an extended period as sterling's depreciation continues to feed through into the prices of consumer goods and services. The 2½% fall in the exchange rate since the May Inflation Report, if sustained, will add to that imported inflationary impetus.

In contrast, pay growth has moderated further from already subdued rates, even as the unemployment rate has fallen to 4.6%, its lowest in over 40 years.

GDP growth declined markedly in the first quarter, in part reflecting weaker household spending. It remains to be seen how large and persistent this slowdown in consumption will prove. In recent months, there have been further signs of a slowing housing market and new car registrations have fallen sharply. Consumer confidence has remained relatively resilient, however, and employment has continued to rise. Outside the household sector, export indicators have strengthened, probably reflecting both the depreciation of sterling and increasingly robust global demand. Most surveys of investment intentions have remained above their historic averages. Surveys of general business activity suggest a modest recovery in GDP growth in the second quarter.

Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years. Attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth. For this reason, the MPC's remit specifies that, in such exceptional circumstances, the Committee must balance any trade-off between the speed at which it intends to return inflation sustainably to the target and the support that monetary policy provides to jobs and activity.

The projections that the Committee published in May showed that the economy was expected to operate with a small degree of spare capacity for most of the three-year forecast period, justifying the tolerance of some degree of above-target inflation. The continued growth of employment could suggest that spare capacity is being eroded, lessening the trade-off that the MPC is required to balance and, all else equal, reducing the MPC's tolerance of above-target inflation. Looking ahead, key considerations in judging the appropriate stance of monetary policy are the evolution of inflationary pressures, the persistence of weaker consumption and the degree to which it is offset by other components of demand.

In light of these considerations, five members thought that the current policy stance remained appropriate to balance the demands of the MPC's remit. Three members considered it appropriate to increase Bank Rate by 25 basis points. All members agreed that any increases in Bank Rate would be expected to be at a gradual pace and to a limited extent. The Committee will continue to monitor closely the incoming evidence, and stands ready to respond to changes in the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.

Gold Trading lower within uptrend channel.

Gold is consolidating within uptrend channel. Hourly support is located at 1246 (18/05/2017 low). Stronger support is given at 1195 (10/03/2017 low). Expected to show renewed upside pressures.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).

Silver Selling demand.

Silver declines. Closest support is given at 16.44 (18/05/2017 low). Strong support is given at 16.06 (09/05/2017 low). Key resistance is given at a distance at 19.00 (09/11/2017 high). The road seems wide open for further decline.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Crude oil Heading to support at 43.76

Crude oil is finally continuing its decline since the recent collapse from $52. Support is given at a distance 43.76 (05/05/2017 low). Expected to show further decline.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 24.82 (13/11/2002) while resistance can now be found at 55.24 (03/01/2017 high).

EUR/JPY Breaking support at 122.56.

EUR/JPY is trading lower. Hourly support given at 122.56 (18/05/2017 low) has been broken. Hourly resistance can be found at 125.82 (16/05/2017 high). Major support is given at 114.90 (18/04/2017 low).

In the longer term, the technical structure validates a medium-term succession of lower highs and lower lows. As a result, the resistance at 149.78 (08/12/2014 high) has likely marked the end of the rise that started in July 2012. Strong support at 94.12 (24/07/2012 low) looks nonetheless far away.

EUR/GBP Bearish pressures are increasing again.

EUR/GBP is back below former support given at 0.8787 (13/03/2017 high). The pair keeps on going higher. Strong support can be found at 0.8304 (05/12/2017 low). Expected to reach 0.8900.

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.

EUR/CHF Short-term surge.

EUR/CHF is back below 1.0900. Yet, we believe that the medium-term pattern suggests us to see continued bearish pressures towards hourly support that can be found at 1.0792 (03/05/2017 low).

In the longer term, the technical structure is mixed. Resistance can be found at 1.1200 (04/02/2015 high). Yet,the ECB 's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

Notes/Observations

SNB leaves policy steady but reiterates concerns about CHF currency (Franc)

UK retail sales miss expectations as accelerating inflation squeezed British wallets

No surprises expected from BOE; to maintain its policy steady

Eurogroup expected to approve Greece 2nd bailout review; works towards achieving a sustainable debt solution

Overnight

Asia:

New Zealand Q1 GDP came in softer-than expected (Q/Q: 0.5% v 0.7%e; Y/Y: 2.5% v 2.7%e

Australia Jun Consumer Inflation Expectation it's a 6-month low (3.6% v 4.0% prior)

Australia May Employment Change saw its 3rd straight month of increases (+42.0K v +10.0Ke); with Unemployment Rate hitting a 4-year low (5.5% v 5.7%e)

Europe:

UK govt said to plan a 'very generous' post-Brexit offer to EU citizens. To guarantee EU nationals living in the UK the same rights as they currently hold. Expected to move cutoff date for citizens' rights from March 2017 to Brexit day in 2019

Chancellor of Exchequer Hammond to make case at Mansion House speech for a ‘pragmatic Brexit'

German Chancellor Merkel: Europe was ready for Brexit talks; door to Europe was open but decision is up to the British

ECB's Rimsevics (Latvia): ECB should be predictable and not cause any surprises. Forward guidance was important and did not want to have any surprises

Americas:

FOMC raised Fed Funds target by 25bps to 1.00-1.25% range ( as expected) in a 8-1 vote (Kashkari again dissented). It saw cutting reinvestment beginning in 2017 and expanded on quarterly basis until it reached $30M/month for treasuries and $20B/month in mortgaged-backed securities

Fed chair Yellen Press Conference: noted that it had not seen any evident upward pressure on inflation; Fed credibility had not been impaired; quite essential to have policies to get inflation to target

Special counsel Mueller said to be investigating President Trump for possible obstruction of justice

US Senate voted by 97-2 margin to increase Russia sanctions due to alleged interference in 2016 elections/annexation of Crimea/support from Syria Govt

Economic Data

(SE) Sweden May PES Unemployment Rate: 3.7% v 3.8% prior

(FR) France May Final CPI M/M: 0.0% v 0.1%e; Y/Y: 0.8% v 0.8%e

(FR) France May Final CPI EU Harmonized M/M: 0.0% v 0.0%e; Y/Y: % v 0.9%e, CPI Ex-Tobacco Index: 101.28 v 101.31e

(CH) Swiss May Producer & Import Prices M/M: -0.2% v -0.1%e; Y/Y: 0.1% v 0.2%e

(CH) Swiss National Bank (SNB) left its Deposit Interest Rate unchanged at -0.75% and maintained the 3-Month Libor Range unchanged between -0.25 to -1.25% (as expected)

(IT) Italy May Final CPI (including tobacco) M/M: -0.2% v -0.2% prelim; Y/Y: 1.4% v 1.4% prelim

(IT) Italy May Final CPI EU Harmonized M/M: -0.1% v -0.2% prelim; Y/Y: 1.6% v 1.5%e v 1.5% prelim

(UK) May Retail Sales (Ex Auto Fuel) M/M: -1.6% v -1.0%e; Y/Y: 0.6% v 1.9%e

(UK) May Retail Sales (Inc Auto Fuel) M/M: -1.2% v -0.8%e; Y/Y: 0.9% v 1.6%e

(IT) Italy Apr General Government Debt: €2.270T v €2.260T prior (record high)

(EU) Euro Zone Apr Trade Balance (Seasonally Adj): €19.6B v €22.0Be ; Trade Balance: €17.9B v €28.5Be

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold totyal €4.23B vs. €4.0-5.0B indicated range in 2022, 2027, 2032 and 2037 bonds

Sold €1.82B in 0.4% Apr 2022 SPGB; Avg yield: 0.215% v 0.369% prior; Bid-to-cover: 1.41x v 2.18x prior

Sold €1.06B in 1.5% Apr 2027 SPGB; Avg yield: 1.395% v 1.548% prior; Bid-to-cover: 1.78x v 1.43x prior

Sold €690M in 5.75% July 2032 SPGB; Avg Yield 1.925% v 2.116% prior; Bid-to-cover: 1.47x v 1.65x prior

Sold €630M in 4.20% Jan 2037 SPGB; Avg Yield: 2.314% v 2.604% prior; Bid-to-cover: 1.58x v 1.54x prior

(FR) France Debt Agency (AFT) sold total €7.955B vs. €7.0-8.0B indicated range in 2020, 2022 and 2023 Oats (4 tranches)

Sold €2.40B in 0.00% Feb 2020 Oat; Avg Yield: -0.48% v -0.45% prior; Bid-to-cover: 2.65x v 2.10x prior

Sold €2.166B in 0.00% May 2022 Oat; Avg yield: -0.22% v -0.12% prior; Bid-to-cover: 1.62x v 1.86x prior

Sold €1.656B in 3.00% Apr 2022 Oat; avg yield: -0.26% v -0.06% prior; Bid-to-cover: 1.91x v 2.44x prior

Sold €1.733B in 4.25% 2023 Oat; Avg Yield: -0.06% v -0.14% prior; Bid-to-cover: 2.00x v 1.95x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.8% at 3518, FTSE -0.7% at 7423, DAX -0.6% at 12725, CAC-40 -0.9% at 5197, IBEX-35 -1.2% at 10645, FTSE MIB -0.4% at 20870, SMI -0.4% at 8817, S&P 500 Futures -0.5%]

Market Focal Points/Key Themes European Indices trade lower across the board following on from a rate rise as well as weaker inflation and retail sales figures out of the US. The UK also posted Retail sales which fell short of expectations as rising inflation and falling wage growth weigh. On the corporate front DFS trades sharply lower after the Furniture retailer cut EBITDA guidance, whilst OHL trades higher after OHL Mexico is to be acquired for MXN27/shr. Looking ahead key events include the BoE rate decision at 12BST, whilst in the US, scheduled earnings include Kroger and Bob Evans Farms.

Equities

Consumer discretionary [Poyry [POY1V.FI] +29% (Raised guidance), Majestic Wines [WINES.UK] -2.8% (Earnings), DFS [DFS.UK] -22% (Cuts outlook), Wizz Air [WIZZ.UK] -8% (Placing), Next [NXT.UK] -3% (Analyst Downgrade), H&M [HMB.SE] -3% (May Sales)]

Industrials: [OHL [OHL.ES] +13% (Magenta Infraestructura, IFM Global Infrastructure Fund to acquire OHL Mexico for MXN27/shr)]

Healthcare: [Basilia [BSLN.CH] +6.7% (Licence agreement with Pfizer)]

Speakers

Swiss National Bank (SNB) quarterly policy statement reiterated CHF currency (Franc) remained significantly overvalued and would remain active in FX markets and intervene if necessary . To regularly reassess the need for an adjustment of the countercyclical capital buffer

SNB's Jordan post rate decision press conference: Inflation remained very low; expansionary monetary policy remained necessary to ensure price stability. Inflation expectations were within the range that was consistent with SNB's definition of price stability

SNB's Zurbruegg: To monitor mortgage-market developments and assess the need for any capital-buffer adjustment. More progress needed on bank resolution

SNB's Maechler: Inflation outlook in major economies were muted

SNB Financial Stability Report saw conditions of Swiss banking sector continuing to improve. Low interest rates carry some risks for financial stability

Greece Econ Min Papadimitriou said to accuse German Fin Min Schaeuble of being "dishonest" by blocking debt relief despite his acknowledgement that Athens has implemented significant reforms

Romania President: To ask ruling coalition to solve internal crisis after Social Democrats party withdrew support for its PM

Currencies

USD maintained a firmer tone in the aftermath of the FOMC rate decision. Markets had priced in a ‘dovish Fed rate hike'. However, a rather upbeat tone on the US economy and path for interest-rate increases remained intact despite recent disappointing economic data

GBP was softer ahead of the BOE rate decision. More weak UK data weighted upon the pound. May UK retail sales data seemed to confirm that accelerating inflation squeezed British wallets. GBP/USD probing the lower end of the 1.27 level just ahead of the NY morning. No surprises expected from the BOE with the vote to keep policy steady expected to remain at 7-1 with Forbes again likely to be the sole dissenter in her last policy meeting.

EUR/USD dipping below the 1.12 level with the move attributed to the more ‘hawkish Fed' commentary from Thursday.

Fixed Income

Bund futurestrade at 165.17 down 23 ticks after topping out at 165.55. Resistance lies near the 165.95 level followed by 166.21. A break of the 164.65 support level could see lows target 163.70 followed by 160.30.

Gilt futures trade at 129.81 lower by 41 ticks, along with other core bonds. The focus remains the BOE Rate decision at 12PM London time. Gilts have been rising steadily since May 9th. Price still finds initial support at the 129.14 level, with key support at the 128.27 support level. An acceleration lower could test the 127.43 region. Resistance lies at the 130.28 level followed by 132.65.

Thursday's liquidity report showed Wednesday's excess liquidity fell to €1.6760T a slight gain of €2.5B from €1.6785T prior. Use of the marginal lending facility rose to €180M from €178M prior.

Corporate issuance saw over $500M come to market via 1 issue from Yapi Ve Kredi senior unsecured note offering

Looking Ahead

(ID) Indonesia Central Bank (BI) Interest Rate Decision: Expected to leave Reverse Repo Rate unchanged at 4.75%

(PE) Peru May Unemployment Rate: 7.2%e v 6.8% prior

(PE) Peru Apr Economic Activity (Monthly GDP) Y/Y: 1.0%e v 0.7% prior

(CO) Colombia May Consumer Confidence Index: No est v -12.8 prior

05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills

05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Rate Notes

05:30 (IE) Ireland Debt Agency (NTMA) to sell €500M in 12-month Bills

05:50 (FR) France Debt Agency (AFT) to sell €1.0-1.5B in 2025, 2027 and 2047 I/L bonds (Oatei)

06:45 (US) Daily Libor Fixing

07:00 (UK) Bank of England Bank (BOE) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.25%; maintain Asset Purchase Target (AFT) at £435B

07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave Benchmark Repurchase Rate unchanged at 8.00% (all key rates unchanged)

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Jun Empire Manufacturing: +5.0e v -1 prior

08:30 (US) Jun Philadelphia Fed Business Outlook: 24.9e v 38.8 prior

08:30 (US) May Import Price Index M/M: -0.1%e v 0.5% prior; Y/Y: 2.9%e v 4.1% prior; Import Price Index (ex-petroleum) M/M: No est v 0.4% prior

08:30 (US) May Export Price M/M: 0.2%e v 0.2% prior; Y/Y: No est v 3.0% prior

08:30 (US) Initial Jobless Claims: 241Ke v 245K prior; Continuing Claims: 1.92Me v 1.917M prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (RU) Russia Gold and Forex Reserve w/e Jun 9th: No est v $406.9B prior

09:00 (BE) Belgium Apr Trade Balance: No est v -€1.5B prior

09:00 (CA) Canada May Existing Home Sales M/M: No est v -1.7% prior

(EU) European Finance Ministers (Eurogroup) meet in Luxembourg

09:15 (US) May Industrial Production M/M: 0.2%e v 1.0% prior; Capacity Utilization: 76.8%e v 76.7% prior, Manufacturing Production: 0.1%e v 1.0% prior

10:00 (US) Jun NAHB Housing Market Index: 70e v 70 prior

10:30 (US) Weekly EIA Natural Gas Inventories

11:30 (IL) Israel May CPI M/M: 0.4%e v 0.2% prior; Y/Y: 0.7%e v 0.7% prior

12:00 (IS) Iceland May International Reserves (ISK): No est v 684B prior

12:00 (CA) Canada to sell 3-Year Bonds

15:00 (CO) Colombia Apr Industrial Production Y/Y: -5.6%e v +4.8% prior

15:00 (CO) Colombia Apr Retail Sales Y/Y: -2.1%e v +1.9% prior

16:00 (US) Apr Total Net TIC Flows: No est v -$0.7B prior; Long-term TIC Flows: No est v $59.8B prior

18:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 2.50%

The political chaos in Westminster, uncertainty over the UK's economic outlook and ongoing Brexit concerns should encourage the Bank of England to 'stand pat' on rates in Thursday's MPC meeting. With the central bank highly unlikely to make any changes to monetary policy amid the instability, investors will most likely direct their attention towards Mark Carney for insights on how he plans to tackle the various challenges thatthe UK political climate and Brexit developments have presented.

While inflation in the UK has hit a four-year high at 2.9%, wage growth remains subdued and this creates further headaches for the BoE. Although raising interest rates to cool inflation is seen as a practical strategy, it may simply end up pressuring borrowers ultimately eroding business confidence and pinching consumers further.

Prior to the anticipated BoE meeting, the British Pound was vulnerable to heavy losses following the disappointing 1.2% decline in UK retail sales in May which fueled fears of Brexit negatively impacting the UK economy. UK retail sales have plunged for the second time in three months as rising inflation diminishesthe purchasing power of consumers. With wage growth struggling to keep up with inflation, concerns may mount over the sustainability ofthe UK's consumer-driven economic growth.

Fundamentally, Sterling remains gripped by political uncertainty while ongoing Brexit woes have obstructed upside gains. With recent economic data following a negative trajectory, Sterling bears could be instilled with enough inspiration to send the GBPUSD towards 1.2600.

Yellen dishes out hawkish surprise

Financial markets were caught completely off guard during late trading on Wednesday after the Federal Reserve adopted a firmly hawkish stance and even displayed some optimism overeconomic growth despite mounting concerns over weak inflation. The tone of caution investors were anticipating from the Fed was replaced by a strong determination to continue tightening in response to falling employment while accepting the prolonged periods of weak inflation this year. Although the hawkish surprise offered a temporary boost to the Dollar, markets have not bought into this newfound optimism as expectations of another interest rate increase in 2017 currently stands below 50%.

With the recent economic developments in the US encouraging FOMC members to trim their medium estimates for inflation to 1.6% this year, the central bank may be in no rush to hike rates again in the coming months. It should be kept in mind that US consumer prices unexpectedly declined in May and retail sales recorded their biggest drop in 16 months which questions whether the Federal Reserve has become excessively hawkish. While the Fed has repeatedly stated that this period of economic softness is 'transitory' this will be put to the test in the coming months as participants heavily scrutinize economic data.

The central bank also shared details about how it would reduce its massive $4.5 trillion balance sheet this year which complimented the hawkish rhetoric.

All in all, there seems to be a disconnect between what the markets anticipate and what the Fed is signaling with investors needing more persuasion on the Federal Reserve's ability to raise rates again. This persuasion could be in the form of improving economic data but until then, the Dollar Index remains under pressure on the daily charts with further weakness opening a path towards 96.50.

Oil markets drowned by oversupply fears

WTI Crude was exposed to heavy losses on Wednesday with selling activity invading Thursday's trading session after an unexpectedly large build in gasoline inventories fuelled oversupply fears. It is becoming quite clear that despite OPEC's valiant efforts to rebalance the saturated markets by trimming output, the global glut continues and has left oil trading at depressed levels.

With the bearish price action on WTI Crude suggesting that those who were heavily bullish on the commodity maybe having second thoughts, the upside may be limited. I believe sentiment towards oil remains heavily bearish and further losses should be expected as oversupply concerns inspire sellers to attack the commodity ruthlessly.