On Wednesday, Sterling surged briefly above $1.27 against its US counterpart, reversing a drop below $1.26 on comments from Bank of England (BoE) policymaker. BoE Chief Economist Andy Haldane struck a more hawkish tone than BoE Governor Mark Carney and said that he was likely to switch to supporting UK’s first rate hike in a decade soon, given the strength of the global economy and the resilience of Britain’s economy to last year’s Brexit vote. Haldane’s comments also highlighted a developing split at the Central Bank, with 3 out of 8 BoE policymakers voting in favor of a rate hike last week.
In the same time, the Canadian Dollar softened to its weakest close in 1-1/2 weeks against the US Dollar as depressed Oil prices offset the Bank of Canada’s shift to a more hawkish stance. Oil prices, Canada’s major exports, hit a 10-month low of 42.05 per barrel, having dropped around 20% since peaking in late February, and wiping out expectations the Central Bank could raise rates sooner rather than later. Meanwhile, the drop in Crude inventories to 2.5 million barrels in the week of June 16, which has surpassed analyst’s expectations for a decrease of 2.1 million barrels, did not affect Oil prices significantly.
Yesterday, Gold prices climbed against its peers early, rebounding from a five week low, supported by an easing US Dollar and weakness in US Treasury Yields. The US Treasury Yield curve flattened to 10-year lows as investors evaluated the impact of hawkish Federal Reserve policy on the economy even as inflation measures are deteriorating.