GBP gains limited after BoE rate rise

Good morning

Bank of England raised rates by 15bps to 25bps, the first major central bank to do so since the pandemic started. It did come as a surprise to the markets even though the odds had seemed finely balanced. The vote was 8-1, Tenreyro the sole member looking to delay until Feb. GBP pushed higher with GBPUSD hitting 1.3370 but has steadily come off those highs, now 1.3315. GBP had also made ground against EUR, EURGBP trading down to 0.8455 (GBPEUR 1.1825) but has crept back to 0.8500 1.1765 as I type. ECB meanwhile made it clear rate rises were not on the agenda for 2022 but did announce the end of PEPP asset purchases in march. There is a feeling 2023 could see a rate rise but lets not worry about that just yet.

Norges Bank raised rates 25bps to 0.5% yesterday while at the other end of the spectrum, Turkey cut rates by 100bps to 14%, sending Turkish Lira weaker than ever. USDTRY started yesterday around 14.85 or so, it now sits up at 16.20, pretty much double the level it was back in September. Back in 2018 there was a currency crisis when USDTRY trade up through 5.00. We are so far above there it is difficult to believe there will not be some major fallout. Worrying times.

Some reasonably positive news to report, UK seem to be prepared to drop demands over ECJ on Northern Ireland which could well open the door to a deal, while UK and Australia sign a trade deal, the first of its kind since Brexit.

Obviously Covid making headlines with daily cases hitting over 88,000 yesterday. I actually ventured into London yesterday, I was surprised how busy the tube was although I was impressed with how many people were wearing masks, but the pub I went to in Kings Cross was considerably more quiet than I have ever seen it. I see there are calls for financial support for pubs and restaurants. As you know I do think we’ll be facing some sort of lockdown after Christmas and obviously this industry will be hit hard. Football matches are already being postponed, France have introduced travel restrictions for UK visitors but still seem happy to allow travellers from other European countries.

Not much in the way of data today, certainly no major US data, a good chance then that the markets turn slow into the afternoon and with the kids breaking up from school today and Covid rearing its head once more, I have a feeling next week may be quiet all round ahead of Christmas.

Weather for the weekend looks dry and reasonably mild, perfect for our last football match of 2021 where we’ll be looking to add to our league points tally. We are currently third despite having played far fewer matches than the teams around us, but of course a major concern is whether the season actually finishes next year. We already have a full calendar all the way into May, any lockdown will probably mean that the season won’t be completed. But lets not worry about that for now, we’re taking one game at a time. Ah, I’m sounding like a real manager now!

- 09.00 German ZEW

- 10.00 EU CPI

- 13.00 BoE quarterly bulletin

- 19.00 Feds Waller speaks

- 20.30 CFTC position data

- Sunday

- 21.45 NZ trade balance

- Monday

- 01.30 PBoC rate announcement