FX round-up: Sterling slips as traders consider US rate hike in June

Sterling had its back to the wall on most key crosses Friday with traders considering the likelihood of a US rate hike in June after this afternoon's bundle of inflation and retail data in that country.

At 17:05 BST, sterling was down 0.08% to $1.2876. It was down 0.67% to €1.1786. Meanwhile, the dollar-spot index was down 0.41% to $99.216.

"The Bank of England disappointed sterling bulls yesterday," said Chris Saint, senior analyst at HL Currency Service.

"The pound is on the back foot again today, slipping to intra-week lows of $1.2845 against the dollar this morning," he added.

Michael Hewson, chief market analyst at CMC Markets UK, contended that sterling had not had a great week.

"However, this would be the first negative week since early April, and only the second one since mid-March," he said.

"This week's data hasn't done the bullish case that much good, while the Bank of England's cautious outlook yesterday hasn't helped."

Sterling was also lower on the aussie, kiwi, rand and yen, but added a little on the loonie.

Meanwhile, the dollar was having a mixed session so far, being down on the euro, aussie, kiwi and yen, but gaining on the loonie and rand.

The US consumer-price index (CPI) rose 0.2% on the month in April. Core CPI rose 0.1%. On an annual basis, US CPI slipped to 2.2% in April, and core CPI was at 1.9%.

Separate data showed US retail and food services sales for April 2017 were up 0.4% from March and up 4.5% on April 2016. Core retail sales gained 0.2% in April.

"The dollar capped one of its best weeks of the year with losses on Friday after data showed the softest retail sales growth of 2017," said Lawler.

"A June US rate hike still looks odds on but the Fed's belief that the economic growth slowdown in the first quarter was 'transitory' is going to hold a lot less water if Q2 goes the same way," he added.

Barclays reaffirmed its prediction the Fed would go ahead with a 25 bp rate hike in June.

"Today’s data do not alter our view that the Federal reserve will tighten policy in June," said Barclays' Blerina Uruci.

"Labor markets remain strong, and communications from FOMC members have been clear that they remain focused on a tightening policy path."