UK leaves rates unchanged, US data is weak

GBP: GBP weakened a little this afternoon - as the Bank of England, which sets interest rates in the UK, left its policy interest rate unchanged at 5.25% at the meeting. The decision was agreed by a vote of 7 for a hold, and 2 for a cut, the same as the previous meeting. 

GBP/USD remains at low levels due to sustained USD buying - sitting near 1.2700. EUR weakness is keeping GBP/EUR near 18month highs over 1.1800 - great levels for UK buyers of EUR

However, the weakness is due to the statement, which said the decision was "finely balanced" suggesting there had been a fair risk the BoE would cut rates instead. 

Despite UK Consumer Price Index (CPI) inflation data showing a fall to the BoE’s 2.0% target in May, higher inflation in other pockets of the economy continue to keep policymakers wary of cutting, with a first rate cut not likely until August. 

USD: The market now has priced in a 60% chance of a 0.25% rate cut from the Fed September following comments from the Fed this afternoon failed to prompt much reaction: Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari argued on Thursday that it will probably take a year or two to get inflation back to 2%, per Reuters.

US Housing data this afternoon showed significant, continued weakness and jobless claims continued to rose (more than last week).

EURO: The ECB now looking like an outlier, having cut rates last month, but seems to be tempering market expectations of further cuts in the near-term. The EURO fails to draw investors .. EUR/$ remaining at low levels near 1.0700.