Speaking on Friday in Birmingham, The Bank of England Governor Mark Carney hit back at criticism from Theresa May regarding the central bank's low interest rates. Carney made it clear that he would not "take instruction" from politicians on such matters. Carney also said that he was willing to allow inflation to run "a bit" higher than the central bank's 2 percent target, in an effort to help employment and to stimulate the UK economy. In September, the BoE signalled that it was likely to cut interest rates below the current 0.25 percent, possibly as soon as its next meeting in November. However, since those signals, Sterling has depreciated ever further, and is likely to put pressure on import prices.
The Dollar traded close to a seven-month high on Friday, after U.S. retail sales data gave more confidence to the case for higher interest rates before the end of the year. Retail sales rose 0.6% last month, to snap back from a small drop recorded in August. Retail sales have grown more slowly for the past 18 months, partly because much cheaper gas allowed Americans to save on energy costs.
The greenback climbed against most of the major currencies, on speculation Fed Chair Janet Yellen would present arguments for a hike in a speech on Friday. In a speech late on Friday, Janet Yellen expressed the Fed’s concern that aggressive steps may be needed to rebuild US economic potential. The market took this to indicate a possible willingness to allow inflation to run beyond the Fed's 2.0 percent target.
The University of Michigan’s Index of Consumer Sentiment hit 87.9 in October, hitting its lowest since Sept. 2015. Economists had expected the index to hit 92.1 in October, up from 89.8 in September's final reading. The report found that it is likely that uncertainty around the upcoming Presidential election negatively influenced consumers, especially those with lower income. The monthly survey of 500 consumers measures attitudes toward topics such as personal finances, inflation, unemployment, government policies and interest rates.
18:35 - EUR - ECB President Draghi to speak at European Cultural Days of th ECB in Frankfurt