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UK rates to top 1% as BoE tightening continues

A 25 basis point hike in UK rates might not do much for the pound in the short-term, especially when set against the Fed’s more hawkish comments.

What to expect from the Bank of England?

The UK’s Monetary Policy Committee (MPC) is expected to raise rates by 25 basis points to 1%, the highest level in 13 years.

What else might it say?

As with the Federal Reserve (Fed) meeting the previous day, the actual rate hike decision is very much priced into markets at present. The March meeting saw the MPC ease back on some of the hawkish rhetoric, as it assessed the impact on the British economy, the overall plan to tighten rates remains intact.

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UK inflation continues to run at a high level, so we should expect further rate hikes later in the year, with 25 basis point moves still the most likely course of action. While this means the pound will remain under pressure vis-à-vis the US dollar, it allows the bank to proceed with its hiking policy without putting too much pressure on the economy, which remains in a weaker position than its US counterpart.

In addition, we will also potentially get more detail on how the bank will begin unwinding some of its balance sheet. The MPC has already said that it will stop reinvesting the proceeds of its bond purchases, but a move to outright selling is still viewed as potentially disruptive, so a tentative timetable may be all we get this time around.

What will happen to the pound?

After the impressive move to the downside since late March, much of the bank’s cautious outlook seems priced in. But as ever GBP/USD is not just about what the Bank of England (BoE) does, but what the Fed is doing too. Here the pound finds itself firmly on the defensive – set against the increasingly hawkish Fed rhetoric, it may struggle to gain traction.

While the BoE plods along with 25 bps increases, the Fed is moving to 50 bps, and some on the Federal Open Market Committee (FOMC) are even calling for 75 bps as a means of getting ahead of inflation. I

n the short-term, there may be little real movement in GBP/USD, unless the Fed is even more hawkish at its upcoming meeting. But the recent run of strength in the dollar seems relatively spent, which provides scope for a counter-trend rally in GBP/USD that could see it head back towards $1.30.

This, however, still favours a bearish outlook, and would give sellers the chance to move on cable once again, but with a better risk-reward outlook in the medium-term than chasing it down at its current level and in the wake of the steep decline of the past four weeks.

By Chris Beauchamp

Source: IG

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UK economy stumbles as consumers, firms brace for downturn

UK economy is losing steam as households face a tightening cost-of-living squeeze, according to data published on Friday which showed sliding retail sales and consumer confidence approaching all-time lows.

The pound slid by more than a cent to fall below $1.29 for the first time since November 2020 after official data and surveys of consumers and businesses pointed a sharp growth slowdown, or worse, in the coming months.

A closely watched gauge of business activity from S&P Global showed growth slowed by more than expected this month as companies grappled with surging costs and became much gloomier about the outlook.

Official data showed retail sales volumes slid by 1.4% in March from February, a worse reading than any economist forecast in a Reuters poll.

Earlier on Friday, market research firm GfK said consumer confidence slumped this month to close to its lowest level since records began nearly 50 years ago.

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Overall, the data underscored growing concern at the Bank of England about the opposing challenges of weakening demand and inflation at a 30-year high of 7% and likely to rise further beyond the central bank’s 2% target.

Governor Andrew Bailey said on Thursday the BoE was walking a tight line between tackling inflation and avoiding recession, a challenge facing other major central banks around the world.

“Whether the UK heads into a recession is still an open question,” said ING economist James Smith, who highlighted the potential for savings that many households built up during the coronavirus pandemic to continue driving growth.

“The jury’s out, but we think the Bank of England is more likely to hike interest rates once or twice more, before pressing the pause button over the summer.”

The S&P Global Composite Purchasing Managers’ Index fell in April 57.6 from 60.9. While still comfortably above the 50 threshold for growth, economists polled by Reuters had mostly expected a smaller fall to 59.0.

Consumer-facing businesses will likely face a tough time in the months ahead, with GfK’s gauge of households’ confidence about their finances in the future slumping to a record low.

The Office for National Statistics said food and petrol sales fell sharply last month and it cited rising prices as possible explanations for the falls. Online retail sales also declined.

Retail sales volumes are 2.2% above their level in February 2020 but they are a long way behind where they would have been if growth had continued along its pre-pandemic trend, Keith Church, an economist from risk consultancy 4most, said.

Earlier this month, Tesco (TSCO.L), Britain’s biggest retailer, warned of a drop in profits as high inflation squeezes the supermarket group and its customers.

Reporting by Andy Bruce

Source: Reuters

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BoE may need to raise interest rates “a little bit,” Mann says

Bank of England monetary policymaker Catherine Mann said interest rates would probably have to go up “a little bit” further, and that in some ways Britain’s economy was already suffering from stagflation.

“We want to avoid inflation getting out of control. And it may mean that interest rates go up a little bit. We’ll just have to see where we are in May,” Mann said in a question-and-answer session after delivering a speech on Thursday.

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Asked about the risk of stagflation – a combination of slow growth and high inflation – Mann said “in some senses, we could say we’re already there” because of the jump in energy prices and slowing retail sales.

“But I think that, you know, it’s premature to kind of hearken back to the 1980s or the 1970s, in the U.S. context in particular, and use that vocabulary,” she said.

Source: Investing

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UK economy: What’s next for inflation, output and the pound?

As the UK economy has dealt with the blows of the Covid pandemic and Russia’s invasion of Ukraine, the Bank of England has had to roll with the policy punches in its effort to pursue financial and economic stability.

Amid an atmosphere of enduring conflict in the East and inflationary pressures, Bank of England governor Andrew Bailey spoke with Breugel director Gundstrom Wolff, laying out the present environment in the UK and how policy can stabilise finance, the economy and currency in the wake of a large-scale military clash, a pandemic and the UK-specific development of Brexit.

Bailey said that the present “shock from energy prices” was historic, greater than any single year of the inflation-stoked 1970s, albeit with the caveat that that decade featured several rough years in succession.

“In the UK, and indeed elsewhere, we are very much facing a very large shock to aggregate real income and spending. That is not something that we have a policy toward that can make it go away,” Bailey said. “It’s coming through energy prices, through imported goods, through some food and is very much what we’d tend to call trade shock in that sense. Inflation measures are well above target. Unfortunately, I think it’s best to think that there is some more to come on that front.”

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“We expect it to cause growth and demand to slow. We’re beginning to see the evidence of that in both consumer and business surveys,” Bailey added.

Tradeoff, unconventional shocks

Bailey said that the Central Bank’s goal was to return inflation to its target “a couple of years out” and ensure that real adjustment occurs sustainably with minimal volatility and disruption. Bailey also said that the BOE and its contemporaries around the world remained committed to a globalised, integrated economy, much as they were during the widespread financial crisis more than a decade ago.

Bailey focused primarily on the disruptions of the pandemic and the dispute between Russia and Ukraine, stating that those two globally impactful events overshadowed and muddied any comprehensive analysis of Brexit’s effects on the UK’s economy and trade.

He said that thus far he felt the Central Bank’s planning had been effective in the face of the harrowing Covid era, the calmer-than-expected Omicron variant period and pandemic recovery, which resulted in a tight labour market and an unforeseen buildup of personal savings.

He said, however, that those with fewer economic means bore a disproportionate brunt of the current circumstances because they did not benefit generally from the surge in savings while simultaneously experiencing greater exposure to rising energy costs.

A resolution to the crisis in Ukraine would go a long way toward solidifying the UK’s position and stabilising energy and commodities markets, Bailey said, though near-term pressure could make the situation worse before it improves.

Now approaching a month old, the conflict has brought a deluge of question marks, which Bailey said caused the BOE to revise its guidance regarding “further modest tightening” in the form of interest-rate hikes from “likely to be appropriate” to “may be appropriate.”

“We’re facing a very big shock, by any historical standard. We’ve got a very large tradeoff between inflation and output activity, with the two moving in opposite directions. There is a very high level of uncertainty,” Bailey said.

Behind the curve?

In prior instances of market shock, Bailey said that the current policy would be behind the curve, facing pressure to accelerate counter-inflationary measures, including rate hikes.

However, he said, this was not a typical instance of a demand shock, with some favourable economic indicators as well as the large scale of the disruptions giving some pause and cause for caution to policymakers.

“We’ve got a pandemic followed by a European war, on any scale that is a very difficult position to be in for policy. The task we have is clear, but it’s hard, but we will stick to it and all central banks are committed on that front,” Bailey said. “In our case, it’s appropriate to tighten policy in these circumstances, but we do so recognising the uncertainty.”

Forex implications, long-term prognosis

Bannockburn Global Forex chief strategist Marc Chandler assessed the broader strategy in the UK and its impact on the pound, which has produced a mixed forecast and tepid results in recent days even as stable currencies have been attractive to risk-off investors.

“Sterling has underperformed here in March. It is the second weakest major fx, off 2.45%, well less than the Japanese yen’s 7.1% decline. The Bank of England hiked rates but softened its guidance, and the market does not think it can keep pace with the (US Federal Reserve),” said Chandler, noting that the US two-year premium over the UK doubled in March, around 100 basis points and that he saw the pound as “heavy,” poised to drop to $1.28 or $1.29 from its present position near $1.38.

Bailey emphasised repeatedly the need for collaboration among central banks around the world in a globalised economy. Yet as tones grow more hawkish in many countries, including the US and Canada, the UK has opted for prudence.

“At the end of the day, Bailey talks like a hawk and acts dovishly,” Chandler said. “There are shades of former Bank of England governor Mark Carney, who was often talked about as the bad boyfriend who over-promised and under-delivered.”

By Andrew Knoll

Source: Capital

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Soaring inflation is biggest financial worry among UK adults

The biggest financial concern of UK adults, in both the short and longer term, is rising inflation, according to new research from M&G Wealth.

A quarter (25%) of people surveyed cited rising inflation as their greatest financial concern this year, while just more than one in five (22%) respondents said rising inflation was their biggest financial worry for the next five years.

M&G Wealth’s latest research which quizzed 2,000 UK adults who have personally, or who have parents or grandparents who received financial advice from an adviser in the last five years, looked at how individuals felt about their savings habits as the cost of living rises.

Unsurprisingly, the research found respondents were more focused on their short-term financial needs. Beyond rising inflation, worries included ‘my investments losing money’ (18%) and ‘not saving any money’ (17%).

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The cost of living played heavily on the minds of respondents. More than a quarter (26%) surveyed said they were worried the cost of living will go up, and so preventing them saving as much as they would like to, while 18% said their bills were too high to allow them to save more.

Savings rates overall were less than desirable. Some 14% of adults save less than £50 per month, and nearly a fifth (18%) of those surveyed said they could not afford to save more.

Looking to respondents’ ‘rainy day fund’, the picture was a little brighter. Nearly a quarter (23%) of those surveyed said they had more than a year’s expenses set aside. However, a third (33%) of respondents had expenses to cover three months or less saved, and 8% of respondents had nothing saved at all.

Les Cameron, savings expert at M&G Wealth, said: “While consumers have no control over rising inflation, currently at a 30-year high and predicted, by the Bank of England, to reach over 7% by the spring, there are steps they can take to take control of their finances.

“From energy bills to their weekly shop, families are starting to feel the pinch, and as a result are unable to save as much as they would like. Many are taking practical steps such as shopping around for cheaper prices to bring down the cost of basics like bread and milk, and setting out and sticking to a budget will help families feel more in control of their spending in the short-term. Though it may feel difficult at the moment, investing any savings, no matter how little, will provide a long-term benefit and hopefully some peace of mind for the future.

“When it comes to savings consumers are understandably worried. Current savings rates are lower than inflation, meaning those with significant cash savings really need to consider whether to accept that inflation is eroding the value of their money, or take some investment risk to try to maintain or grow the real value of their money. Investing is not, however, a decision to be taken lightly and is an area where most people could benefit from receiving some form of financial advice or guidance before going ahead.”


Source: IFA Magazine

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Bank of England poised to raise interest rates as high inflation takes toll

Interest rates are expected to increase this week for the third time in three months as the Bank of England tries to curb a rapid rise in the cost of living.

A hike to 0.75% from 0.5% is anticipated, which would return us to the level of March 2020 but comes against the backdrop of geopolitical volatility and the likelihood that inflation will exceed 7%.

Rising gas and electricity costs are the main factors pushing up prices across the economy.

Inflation, as measured by the consumer prices index (CPI), is expected to peak at 7.25% in April, and average close to 6% in 2022.

Despite inflationary pressures, demand for property remains strong.

The latest figures show that the number of new prospective buyers in the UK was 47% higher than the five-year average in the first week of March. The figure for the first nine weeks of the year was up by 54%.

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Meanwhile, the number of offers accepted was up by 81% in the first week of March, having risen 50% over the first nine weeks of the year.

Much-needed housing supply is also showing signs of picking up, with the number of market valuation appraisals 11.3% higher in the first nine weeks of the year. Sales instructions are catching up but were down by 6.3% over the same period.

Why is the market so active despite the current economic and political backdrop?

Tom Bill, head of UK residential research at Knight Frank explained: “The first reason is easily overlooked – the end of the pandemic. The lifting of final restrictions and return to normality is spurring people to take decisions about how and where they live. Crucially, it means demand is more needs-driven and less susceptible to external events.

“In higher-value property markets, larger bonuses in sectors including financial services and law have also provided some insulation against the spiralling cost of living.”

But growth is not limited to a narrow group of professions, according to Savvas Savouri, chief economist at Toscafund.

He believes challenger banks will drive competition in the mortgage market and put downwards pressure on rates in the same way Aldi and Lidl did in the supermarket sector.

Savouri commented: “Households are sitting on £250bn of excess savings compared to the start of the pandemic. House price growth has also created an extra £1trn in housing equity over the last two years.”

He expects the Bank of England base rate to end the year at 1.25% or 1.5% as the current uncertainty leads to a slightly shallower upwards trajectory. However, he remains bullish in his outlook for the UK economy this year.

“For a recession, you need the labour market or the banking system to collapse and we are nowhere near either,” he added.

Knight Frank expect house price growth to return to single-digits as supply continues to pick up and rates normalise, but the estate agency says that it seems unlikely it will get anywhere close to zero.


Source: Property Industry Eye

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Inflation to accelerate far ahead of Bank of England’s target as rate hikes loom

Inflation in the UK will soar far above the Bank of England’s target this year as the Russia-Ukraine war drives energy prices to record highs.

Accelerating prices will hit “almost all businesses and consumers” this year and choke economic growth, Thomas Pugh, an economist at RSM, warned today, adding that the cost of living could climb as high as nine per cent.

Surging oil and gas prices sparked by the Russia-Ukraine war has led economists at RSM to predict the energy watchdog could hike the price cap a further 75 per cent in October.

Threadneedle Street will trade off shielding economic growth and in exchange for taming inflation by hiking rates at each of its next four meetings and send borrowing costs to 1.75 per cent by November, according to Bank of America.

Rates have not been that high since December 2008, underlining how concerned the Bank is about the cost of living pulling ahead of its two per cent target.

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Communication gaffes over the last year have “undermined [the Bank’s] ability to use words to control expectations,” analysts at Bank of America said.

As a result, lifting rates will be the Bank’s main tool to curb price rise expectations.

Poor wage growth coupled with elevated inflation will erode real incomes at one of the steepest rates in peacetime, Bank of America said, adding that household consumption, which accounts for around 60 per cent of UK output, will stagnate for the next 12 months.

Both RSM and Bank of America slashed their forecasts for UK GDP growth this year.

Commodities are widely used by producers across the economy, meaning higher prices will leave them with the choice of either operating with lower profit margins or raising prices to offset higher costs.

The latter increases the risk of creating conditions in which a wage/price could occur, in which workers demand higher pay to maintain their living standards, leading firms to raise prices even further.

Inflation is already at a 30 year high, hitting 5.5 per cent in January.


Source: City AM

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BoE’s remit is to maintain inflation close to 2%

Part of the Bank of England’s remit is to maintain inflation close to a 2% target level, according to Tom Denman, chief financial officer at Principality Building Society.

Denman said: “It is already more than double this amount, and is predicted to go higher still.”

On Thursday, February 03, 2022, the Bank of England increased the base rate from 0.25% to 0.50%. This was the second increase in the base rate since December. One in five mortgages across the UK are trackers, which means due to the base rate rise, repayments will increase in line with the Bank of England’s decision.

The Consumer Price Index, a measure of the costs of goods and services, hit 5.4% in January, which is above the Bank of England target of 2%.

Denman added: “The MPC has raised rates because they fear that the inflationary pressures being witnessed in the wider economy are becoming entrenched.

“If they do not act to control it, there is the risk that wage inflation will follow as employees demand higher wages to compensate for these price rises.”

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As a result, Denman said this would cause firms to have to increase prices further in order to pay for those increased wage demands.
In this way, he believes there is a risk that inflation could spiral, which is something central banks are historically afraid of.

The rate of inflation, already at its highest level for almost 30 years at 5.5%, is tipped by the bank to hit 7.25% in April when the energy price cap is lifted, with bills expected to rise by an average of almost £700 to account for unprecedented increases in wholesale gas costs.

The price cap is currently limiting the rates a supplier can charge for its default tariffs.

Denman outlined that the markets are pricing in a number of base rate increases throughout 2022, beginning with a 0.25% hike in base rate.
“This could take Bank Base Rate to around 1.0% by the end of the year, or even slightly above that level,” he added.

Ben Merritt, director of mortgages for Yorkshire Building Society, said that given the acceleration in inflation in the past year, combined with a hot jobs market, it is no surprise the Bank of England has moved to increase the Bank Rate, and indeed we have had two in quick succession.

“With the Bank of England predicting inflation will peak at over 7.00% in April and remain above the 2% target in 2022 and 2023, the Bank Rate is likely to increase further this year but most economists expect it will probably settle at 0.75% to 1.00%,” added Merritt.

Base rate increases normally result in mortgage rates rising and, while this may happen, Merritt believes intense competition in the mortgage market will mean the cost of borrowing may not rise in line with the bank rate and should still remain affordable.

Further to this, Andrew Bailey, governor of the Bank of England, has warned that large wage and price rises that reflect surging inflation risk embedding rising costs in the economy that will result in “slow activity and increased unemployment”.

He told the Treasury committee of MPs that the so-called second round effects of the energy-led rise in living costs were his “biggest concern” and, if realised, would hurt the least well-off the most and lead to even higher interest rates.

Looking to expectations, Denman said that given the MPC’s behaviour and rhetoric over recent years, he was expecting them to acknowledge the risk that raising rates too far or too fast could have a negative effect on economic growth.

He added: “We also expect them to be mindful of this as we exit the pandemic and go through 2022.”

Overall, Morgan Miles, head of product pricing at Principality Building Society, said: “It has been a tough few years for savers given the low rate environment, so we are happy to be able to increase the interest rates of our savings products.”

Miles went on to detail that Principality Building Society has tried to support savers as much as possible, maintaining an average interest rate on its accounts which has been consistently higher than the market average.

By Jake Carter

Source: Mortgage Introducer

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UK inflation has economy in ‘chokehold’ with peak yet to come

As UK inflation hit a 30-year high of 5.5% in January, analysts have warned that it has the economy in a “chokehold”, with the peak yet to come.

According to the latest data from the Office for National Statistics, the 12-month UK Consumer Price Index was at its highest level since records began in January 1997. The last time it was higher than current levels was in March 1992 when it stood at 7.1%, based on historic modelling.

Laith Khalaf, head of investment analysis at AJ Bell, said: “Inflation is building and is now expected to reach a crescendo of over 7% in April, heaping pressure on consumers, businesses and savers.”

Although the Bank of England, which is expected to continue increasing interest rates on the back of better-than-expected UK job data, believes inflation will sink back down to 2% by 2024, Khalaf noted that inflation is, indeed, “unpredictable”.

“It is prudent to acknowledge that it might possibly tail off, though the bank’s forecasting capabilities haven’t exactly won any awards in recent times. The Ukraine crisis further muddies an already blurred picture.”

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Rupert Thompson, chief investment officer at Kingswood, said: “Inflation will head higher still over coming months, likely peaking at around 7.5% in April when the increase in the energy price cap feeds through. Today’s data leave a further 0.25% rate hike in March looking all but a done deal.”

Meanwhile, prices continue to rise while wages remain suppressed.

Chris Beauchamp, chief market analyst at IG Group, stated that markets “will be relieved that the pace of inflation increases appears to have moderated, but today’s further price rises mean consumer spending will keep getting squeezed, heightening the risk of tipping the economy into reverse”.

Rachel Winter, associate investment director at Killik & Co, said: “Inflation has the economy in a chokehold, with prices skyrocketing and consumers feeling significant pressure on their household budgets.

“High energy prices and increased shipping costs are key contributors to this inflationary pressure, but there are other causes for concern in the near term.

“Consumers are braced for next month’s rise in rail fares, growing mortgage payments and higher national insurance, and the Office for National Statistics confirmed yesterday that wages are falling in real terms because they are not keeping pace with inflation. All eyes are on Russia and Ukraine, where conflict would be likely to push oil and gas costs even higher.”

Sarah Giarrusso, investment strategist at Tilney Smith & Williamson, noted that the UK economy remains strong, growing by 7.5% in 2021, representing the strongest growth in the post-war period.

But the Omicron variant of Covid-19 has caused disruptions. “The employment data released yesterday (15 February) showed employment fell 38,000 in January. However, the labour market remains tight with vacancies at their highest level since records began in 2001 and an unemployment rate of 4.1%,” said Giarusso.

“Given this strength and high inflation some economists are expecting the Bank of England will have to be more aggressive than currently signalled by MPC members.”

Willem Sels, global CIO of HSBC Private Banking and Wealth, added that global factors such as supply chain bottlenecks leading to price pressures is likely to see UK inflation continue drifting higher.

“This affects everything from food and clothes prices to cars. There are more local UK factors too, in particular the 54% increase to the Ofgem energy price cap, which will feed through into CPI,” he explained.

“Job figures remain positive but are not enough to offset the squeeze on real household incomes. With inflation exceeding wage growth, real household income will probably fall by 2.5% this year.

“The silver lining? We think the Bank of England will hike interest rates less than the market fears, as it knows that the factors behind inflation are also the drivers behind lower real income, which threaten to limit economic growth. We expect the Bank rate to rise to 1.25%, lower than the markets’ expectation of around 1.75%.”

IG’s Beauchamp added: “Another Bank of England rate rise remains all but certain, but at least this slower pace of CPI increase means the more outlandish expectations will be dialled back. ‘Slow and steady’ are the watchwords for tightening on both sides of the Atlantic, it seems.”

Recent economic data has strengthened the case for more fiscal tightening in the coming months, with consensus expecting a third interest rate hike following the Bank of England’s meeting in March.

At Federated Hermes, the base case is for a further 0.25% increase, although a larger 0.5% rise “cannot be ruled out”, according to Silvia Dall’Angelo, senior economist at the international business of the firm.

“In the short term, the Bank might need to provide a stronger signal and bring some tightening forward to prevent second-round effects from elevated realised inflation against the backdrop of a tight labour market,” she said.

“As the year progresses, the trade-offs the bank faces might change, as high cost-push inflation, fiscal and monetary tightening weigh on the consumption outlook.”

By Alex Rolandi

Source: Professional Adviser

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Sterling flat against euro ahead of BoE speaker

Sterling was flat against the euro not far from a 1-1/2 month low on Wednesday, while investors await a speech by a senior Bank of England official later in the day.

The pound fell sharply against the single currency last week after the ECB’s unexpected hawkish shift boosted euro zone yields, overshadowing the Bank of England’s move of raising rates by 25 basis points.

Bank of England Chief Economist Huw Pill, who will give a speech at the annual conference of Britain’s Society of Professional Economists, “was one of the majority five Monetary Policy Committee (MPC) members voting for just a 25bp hike last week”, ING analysts said.

“We think the BoE will welcome the role the strong pound sterling is playing in deflecting some of the energy price surges – and see no reason for the BoE to start railing against aggressive pricing of the BoE trajectory,” they added.

The pound was flat against the euro at 84.22 pence within striking distance of its post-ECB low at 84.74 pence.

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Money markets are still pricing in a 25 bps rate increase in March and 125 bps by December 2022, but some analysts have warned about the risks of excessive expectations.

They noted that Bank of England Governor Andrew Bailey said last week not to take for granted the BoE was embarking on a long series of rate hikes, while the BoE’s downward revision to inflation forecasts assumed interest rates at 1.5% by mid-2023.

The pound rose 0.2% versus a slightly weakening dollar to $1.3576.

The dollar stayed in a holding pattern a day before the release of U.S. consumer price data that may offer new clues on the pace of Federal Reserve policy tightening.

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Investors will also be monitoring political developments as Prime Minister Boris Johnson fights for his political survival.

On Tuesday, he reshuffled some ministers in his administration to appease his lawmakers, angered by a series of scandals.

“Even without a major change in the policy direction, the replacement of the UK prime minister with a less erratic and gaffe-prone alternative would a be positive for UK risk markets and sterling,” said Kallum Pickering, senior economist, director at Berenberg.

“While the risks may be tilting towards a scenario where Johnson somehow manages to cling on as prime minister, it remains more likely than not that the Conservatives will try to replace him soon, in our view,” he added.

Reporting by Stefano Rebaudo

Source: UK Reuters