The Bank of Canada surprised markets for a second time this year by cutting their target “overnight” rate of interest to 0.5% from 0.75%. The Canadian dollar fell sharply on the news as did other high yields.
Fed Chair Janet Yellen gave some support to the dollar today after hinting that interest rates are likely to rise before the end of the year. But she also warned that the US economy faces potential risks from the turmoil in Greece and China.
After a strong start EUR/USD broke upwards to 1.1083 but was unable to sustain the momentum. A mixed set of data from the Eurozone and uncertainty hanging over approval of a bailout deal in the Greek parliament was enough to turn fragile sentiment bearish.
Cable jumped as high as 1.5634 before falling back below 1.56 but the move placed the market firmly within an upwards channel again. Disappointing retail sales data from the US also acted as a tailwind by dampening sentient towards the dollar.