Currency Note

Pound remains steady ahead of interest rate decision

By Roseanne Bradley December 15th, 2022

Helps pound

At 1pm today, the Bank of England will announce its December interest rate decision

Sterling remained unchanged yesterday despite the UK’s inflation dropping to 10.7%, coming in lower than markets expected. The pound’s indifference may be short-lived as at lunchtime, the Bank of England will decide on its latest interest rate, followed by the European Central Bank, which will announce shortly after.

According to the National Grid, Britons have saved nearly £3m by using “power-hungry devices” at quieter times. This took place under a scheme that aimed to reduce the strain on electricity networks.

Head of the national control at the ESO, Craig Dyke, said: “Delivering the first of the demand flexibility service test events is a major milestone in the evolution of consumer flexibility in the UK.” He added, “This service successfully proves that consumers up and down the country are standing by to get involved in flexibility solutions.”

The International Energy Agency has said that “western efforts to choke off the Kremlin’s income are working.” This follows Russian oil revenues falling last month despite a boost in production.

In US stock markets, America’s stocks advanced ahead of the Federal Reserve’s interest rate decision on Wednesday while the dollar fell.

As expected, the Fed took on a more dovish approach to inflation this time hiking its interest rate by only 50 basis points to 4.25%-4.5%.

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GBP: BoE predicted to hike interest by 50 basis points

Markets are predicting a more dovish outlook from the BoE today, with a 50 basis-point rate hike priced in. Despite this, it is worth noting that BoE policymakers voiced concerns about stubbornly high inflation, in the Bank’s last meeting. This followed inflation soaring back to a 40-year high in September, amid weakening economic outlook.

GBP/USD over the past year

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 EUR: ECB to remain slightly hawkish

The ECB is expected to maintain a hawkish stance towards inflation in this afternoon’s interest rate decision. In its November meeting, policymakers agreed that the central bank should continue normalizing and tightening monetary policy to curb high inflation. Today the ECB is expected to hike interest by 50 basis points (rather than the 75 we’ve seen in previous decisions.)

USD: Return of the retail sales data

Today the big data release is retail sales which is predicted to increase only 0.2% after surging to 1.3% the month before. October’s month-over-month figures pointed to the strongest increase in eight months and today markets expect a smaller increase

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