Dollar on the front foot

The dollar has been on the front foot since Wednesday’s Fed meeting – at which interest rates were left on hold and the chances of a cut anytime soon seemingly ruled out – strengthening to around $1.1160 against the euro, not far off its most recent high of $1.11 in late April. The pound is also a little softer against the dollar, at around $1.30, but not much changed against the single currency, at just over 85.5p, as the Bank of England again leaves interest rates unchanged and following local elections in England, which show the Conservatives (particularly) and Labour losing seats at the expense of the Liberal Democrats, the most obviously pro-EU party, and Independents

The Bank of England left interest rates on hold at 0.75% yesterday. Reflecting easier financial conditions recently (lower bond yields and higher equity markets) and signs of a stabilisation in global activity, and assuming a “smooth” transition to a new UK-EU trading arrangement, the BOE revised up its forecast for GDP growth over the next few years, with the unemployment rate seen falling further from already very low levels and inflation expected to rise above its target of 2%.  Given this outlook, the BOE says interest rates will have to rise gradually over this period and by somewhat more than the market has been pricing in lately

The Euro Area manufacturing PMI ticked up in April but remained below the 50 expansion-contraction threshold, according to the final reading published yesterday, though weakness in this sector is being offset by expansion in the services sector

At home, the latest Exchequer returns show tax revenues up 5.7% year-on-year in January-April and broadly in line with profile

The key data release today is the latest (April) employment report in the US, with the ISM non-manufacturing index due there as well, while the services PMI is scheduled in the UK