Policy makers in Europe followed Australian example, as Mark Carney, during his first monetary policy meeting as the Governor of the Bank of England, signalled that the central bank will keep borrowing costs at a record low for longer than previously was thought, giving more insight into the future policy. The Bank of England held its benchmark interest rate at 0.5%, and kept the asset-purchase programme unchanged, widely meeting analysts' estimations. Despite stabilization in the economy, Carney expressed his concerns about higher yields, which do not warranted by the U.K. economy. The pound dropped to a five-week low during the week, hitting 1.4858 on Friday, the pair's lowest since May 29, after a dovish rate statement from the Bank of England.
Also Thursday July 4, the European Central Bank's President Mario Draghi said he expects to keep monetary policy on hold for an extended period of time, as he is trying to restrain market borrowing costs and boost growth in the 17-nation economy. During his monthly policy meeting Draghi left main refinancing rate unchanged at 0.5%, meeting analysts' expectations, and fleshing out the ECB's outlook for the monetary policy, as investors pushed long-term bond yields higher, posing certain risks for the economy. Draghi's comments weighed on the single currency and pushed it lower versus the greenback. The EUR/USD lost 1.5% during the week and closed at 1.2812, the lowest level in five weeks.
The Swiss Franc lost some ground against the U.S. Dollar during the last week, and closed at 0.9660, 2.2% lower compared with the opening price on Sunday. One of the reasons for such a depreciation was the economic data released on Monday, showing Switzerland's key manufacturing output index slowed slightly in June, while the general trend remains positive, suggesting the economy is developing albeit slowly. The Swiss Purchasing Managers Index rose to 51.9 points last month, down from 52.2 points in May, below analysts' expectations of a 52.5 reading.
One of the main events this week is the FOMC meeting on Thursday, July 10, as Fed's Chairman Ben S. Bernanke's comments are almost always adding turbulence into markets. This time he is expected to try to calm investors and market participants by emphasizing that the bond purchases will not halt until the world's largest economy will strengthen enough, as yields on the U.S. government bonds jumped significantly.