The Bank of England left its benchmark interest rate unchanged yesterday amid signs the U.K. economy had a slow start to the year. In its first policy announcement since the U.K. election last week, the BOE said that its rate-setting Monetary Policy Committee kept the central bank’s main rate at 0.5% and the size of its bond portfolio at 375 billion pounds. The decision was as expected. The BOE normally announces its policy decisions on a Thursday but this month’s announcement was delayed until Monday because of Thursday’s election, which saw Conservative Prime Minister David Cameron returned to power with an outright majority in parliament after five years of coalition. The central bank will on Wednesday publish its latest forecasts for the U.K. economy in its quarterly inflation report. Economic growth was weaker than expected in the first quarter, up just 0.3% from the previous quarter, and annual inflation has slowed to zero following a slump in the oil price. But economists say they expect the central bank will signal that it expects both growth and inflation to accelerate in the second half of the year. Investors expect the BOE to begin slowly raising its benchmark interest rate early next year.
The euro rallied this morning after turning down following a euro-zone finance ministers’ meeting that failed to reach an agreement on debt-wracked Greece’s bailout reform. Athens managed to garner enough money to repay the International Monetary Fund 750 million euros and avoid a default, keeping it from tumbling out of the euro-zone for now. But analysts warned over euro weakness as Athens faces another cash crunch in a matter of weeks. Euro-zone finance ministers meeting in Brussels said Greece could not hope for any of the final 7.2-billion-euro tranche of its 240-billion-euro EU-IMF bailout until it makes key reforms.And with Greek Finance Minister Yanis Varoufakis admitting the country faced an imminent crisis, investors fear for its future in the euro-zone.
The dollar trimmed gains but remained supported against a basket of other major currencies yesterday, as Friday’s U.S. employment data continued to boost the greenback and as trading was expected to remain subdued with no major U.S. data to be released throughout the day. The dollar remained supported after the Labour Department reported on Friday that the U.S. economy added 223,000 jobs in April, just shy of economists forecast for 224,000. The unemployment rate ticked down from 5.5% to 5.4%, the lowest since May 2008. However, March’s payrolls report was revised to show that only 85,000 jobs were created, the fewest since June 2012. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.15% to 95.01, down from 95.24 hit earlier in the session.