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The Bank of England (BoE) hiked its policy rate by “only” 25 bps, with three members voting for a larger move. The GBP weakened more than 1% against the USD in the immediate wake of the announcement, before it erased losses. Economists at HSBC expect a weaker GBP over the medium-term.

The wording on guidance changed to be marginally more hawkish.“On 16 June, the BoE voted to raise its policy rate by 25 bps to 1.25%, as widely expected. The vote was 6-3, with Michael Saunders, Catherine Mann and Jonathan Haskel voting for a 50 bps hike.”

““Over the medium-term, we continue to expect the GBP to weaken further against the USD, built on more measured steps at the BOE compared to the Fed’s ongoing marked tightening. The UK may also face structural challenges over a longer term.”

EUR/USD advances above 1.0550, focus shifts to Powell

EUR/USD is extending the rebound above 1.0550 in the European session this Tuesday. The US dollar remains on the back foot amid risk flows and firmer Treasury yields. Fed-ECB divergence to play out ahead of Powell’s testimony.

EUR/USD News 

GBP/USD recaptures 1.2300 as US dollar keeps falling

GBP/USD is trading close to 1.2300, capitalizing on the risk-on mood-led broad US dollar sell-off. Investors take a breather after last week’s rout in global stocks. Hawkish comments from BOE’s Mann also underpin the pound. 

GBP/USD News 

Gold remains on the defensive below 200-DMA, around $1,835 area

Gold continued with its struggle to gain any meaningful traction on Tuesday and remained confined in a narrow trading band for the second successive day. The XAUUSD seesawed between tepid gains/minor losses through the early European session and was last seen trading in neutral territory.