Currency Note

BoE to hike UK interest rate for 12th consecutive time

By Sharyh Murray-Francis May 11th, 2023

All eyes will be on the BoE this afternoon for the UK's latest interest rate decision.

The pound is still strong against the US dollar on a weekly and monthly footing, after rising to its strongest level in a year on Wednesday. Sterling also maintains gains from this week’s rally against the euro and currently boasts monthly gains of nearly 1 per cent against the single currency.

All eyes will be on the pound today as markets await what is predicted to be the Bank of England’s twelfth interest rate increase.

The latest US inflation rate had positive impact on US equities yesterday, with stocks rising as inflation cooled. The Dow Jones gained over 200 points while the S&P 500 rose nearly 1 per cent. Read on for the inflation results.

It was a different picture for European equity markets though – which took a turn for a lower finish in Wednesday’s afternoon trading session. The benchmark Stoxx 600 and the German DAX down 0.3% each.

On the data front, markets can expect plenty key economic releases between now and Friday. US initial jobless claims and monthly producer price inflation will both be released today at 1:30pm – UK time.

Tomorrow, pound watchers will have lots to digest with the UK’s monthly, quarterly and yearly, GDP figures all scheduled for release at 7am.

Industrial production, manufacturing production and balance of trade will also be released at the same time.

In the eurozone, markets will also see inflation data for France, and Spain tomorrow.

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GBP: MPC to vote on interest rate at noon

With the UK’s annual inflation rate hitting just over five times the Bank of England’s (BoE’s) target, 10.1%, in March, all eyes will be on the BoE this afternoon for its latest interest rate decision. The BoE is expected to raise the bank rate by 25 basis points, to 4.5%, pushing borrowing costs to highs not seen in well over ten years, to tame high inflation.

Pound watchers will be keeping an eye out for any additional volatility in the lead up to, and aftermath of, the BoE’s interest rate decision later today.

GBP/USD over the past year

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EUR: US inflation impacts European equities

Both the benchmark Stoxx 600 and the German DAX were down 0.3% each in afternoon trading on Wednesday. Financials were also down, nearly 1%,  with banks falling by just over half a percent. This came as investors mulled over the latest US inflation data.

This morning however, both the DAX and the STOXX 600 have gained nearly 0.3% each, attempting to rebound from yesterday’s fall.

USA: Economists’ inflation predictions prove accurate

Month-on-month inflation rose 0.4% in April, which was much higher than March’s 0.1% but was in line with the consensus. The same was true for the yearly core inflation rate (which excludes food and energy) yesterday. The rate edged down from 5.6 to 5.5 as expected.

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