Major currency pairs were mostly subdued in the early part of the European session in the absence of key data releases and as traders awaited the key event of the day – the Bank of England policy announcement.

After the BoE decision to keep policy unchanged, sterling strengthened against the dollar to reach a high of $1.3478 before easing to around $1.3280. It was still up on the day after steadily rising from the Asian session low of $1.3104.

The pound jumped in response to the surprise decision by the BoE to keep its benchmark interest rate unchanged as many were expecting at least a 25 basis point cut. The rate now remains at 0.5% and the Bank’s asset purchase program too was left unchanged at 375 billion pounds. However, the policy statement said most MPC members expect some easing at the next meeting in August.

There were no data releases in the Eurozone today and this kept the euro steady around the key $1.1100 level. There was a brief spike up to $1.1163 on the BoE announcement before easing back to prior levels.

The US economic calendar consisted of jobless claims and PPI data. Both reports were upbeat and helped support the dollar.

Initial jobless claims in the US were flat in the week ending July 9, at a seasonally adjusted 254,000 claims. This was lower than the 265,000 expected. The dollar reacted positively to the data since any number below 300,000 is considered indicative of a healthy US labour market. Meanwhile the PPI index rose 0.5% in June versus a 0.3% increase expected.  Producer prices saw the largest increase since May 2015, after increasing 0.4% in May.

The dollar traded sideways against the yen during the European session after successfully breaking above the key 105 yen level in the Asian session. The pair was capped at 105.92 yen in the European session, the highest level in 3 weeks as the yen has been weakening all week. Risk appetite in the markets continues to weaken demand for the Japanese safe haven currency while developments in Japan are also contributing to the yen’s weakness. Japanese officials appear to be pushing for more stimulus measures and there have been reports today that ex-Fed Chief Ben Bernanke advised Japanese officials on the introduction of perpetual bonds to help overcome deflation.

The Canadian dollar strengthened against the greenback during the European session after rising for a third consecutive session following Wednesday’s Bank of Canada decision to hold rates. Also the Bank’s statement was not as dovish. USDCAD fell to a fresh one – week low of $1.2905.

Looking ahead to tomorrow, data out of China on GDP and industrial production should attract the market’s focus.