14 July 2016 at 11:25 GMT
The Bank of England held off cutting interest rates Thursday morning as had been widely expected and GBPUSD spiked some 200 pips in the immediate aftermath for a peak above 1.3450 before subsiding. It comes on yet another extraordinary morning of politics in the UK which has seen Boris Johnson take the plum foreign secretary role.
GBPUSD was at 1.3370 at 1124 GMT.
Elsewhere, European stocks are advancing with the FTSE 100 hitting an 11-month high and Dax once again across the 10,000 threshhold. Germany, meanwhile, has issued a 10-year bond at a negative yield as the new "normal" asserts itself.
- US Initial Jobless Claims (265K exp.) (1230 GMT)
- US June PPI Final Demand (1230)
- Federal Reserve's Dennis Lockhart to speak (1515)
- Federal Reserve’s Lockhart to speak (1715)
JPY continued to deprecate vs majors today, with USDJPY cleared well above 105.00 on speculation of Japan’s fiscal stimulus package to be clarified later this month. The BoE interest-rate decision did not deliver the expected easing for the first time since 2009 that had been priced in priced in. EURUSD traded in tight range around 1.100 figure throughout the session.
GBP: GBPUSD spiked some 200 pips in the immediate aftermath of the BoE shock deicision not to cut interest rates to above 1.3450.
FX Options volatilities
One-week expiry rolls to the next European Central Bank meeting and is therefore being marked higher today. EURUSD at-the-money volumes is trading sidelined so far this morning, but risk reversals continue to trade less in favour of EUR puts.
In frontend overnight one-week risk reversals are now in favour of EUR calls and the latest we have seen is overnight 1.1200 paid at 15 vols in good amount, while ATM was trading at 12.5 vols. USDJPY vol is trading a bit higher together with higher spot.
Bunds are paring losses to trade back above 167. Germany has become the first Eurozone member to issue 10-year bonds at negative yield. The Bank of England fluffed its lines today so what will the ECB do? No stress in US financials ahead of JPM earnings.
Stocks across Europe pushed higher Thursday, looking for a fifth gain in six sessions, although we are yet to see how that will pan out after the BoE non-decision.
Germany’s Dax 30 climbed 1.5% to 10,0081.17, on track for its first close above 10,000 since June 23. France’s CAC 40 rose 1.3% to 4,389.60. Financials and technology shares were the best performing groups, FactSet data showed.
Among individual gainers, UniCredit SpA shares tacked on 5.6% after Italy’s largest lender said it’s considering a capital increase to meet ECB requirements, as recent asset sales may not be enough to satisfy the central bank.
Markets had largely priced in a BoE cut of 25 basis points in the benchmark interest rate, to a record low 0.25%. The bank’s rate hasn’t been changed since March 2009 when it was cut to 0.5%.
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I've only gone and landed the foreign-secretary role! Photo: iStock
— Edited by Martin O'Rourke