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  • richard evans

GBP lower after BoE raises rates

Good morning

BoE did indeed raise rates 25bps to 4.5% yesterday, the twelfth consecutive raise. Two members did vote to keep rates unchanged. 2023 and 2024 GDP forecasts were revised higher, while BoE sees inflation possibly halving this year although would still be too high according to BoEs Bailey. So all pretty much as expected. So why did GBP weaken? Well Bailey did suggest April CPI could drop and that we could see a pause in rates if inflation does slow and a rate rise is June is highly data dependent.

GBPUSD dipped below 1.2500, now 1.2535, while GBPEUR fell back to 1.1450, now 1.1465, those small gains coming after the GDP announcement this morning. EURUSD holds around 1.0930. Ex-BoE official Saunders said there is a strong chance inflation will undershoot BoE forecasts in April and sees perhaps just one more rate rise although did add that rates may have peaked. Supermarkets have also said food prices are past the peak and that they should begin to fall although I’d happily bet we’re not getting anywhere near back to where they were a year or two ago.

US regional bank shares were hit again, the banking crisis clearly not going away. The US debt issues haven’t gone away either, still concerns mount over a possible US default.

NZD is weaker after a lower than expected inflation forecast overnight, GBPNZD trading up to 2.0050, some 250 points higher than yesterday. GBPAUD has been dragged higher, now just above 1.8700, but still well short of the early May highs around 1.9000.

South Africa got plenty of attention yesterday on reports they had given ammunition and weapons to Russia back in December. USDZAR jumped higher, currently trading 19.45 having started the week down at 18.27 or so. Similarly, GBPZAR leapt to 24.40 having been around 23.05 on Monday. If South Africa have sided with Russia it doesn’t bode well for them. An investigation is taking place.

In Turkey, a rival to Erdogan has withdrawn from the election which could see Kilicdaroglu, Erdogans main opponent, gain a larger share of the vote. Turkish equities rallied but TRY remains weak, USDTRY up at 19.57 and EURTRY 21.59. My money is still on Erdogan.

Kids have been packed off to school for the lat time, not including upcoming examinations. We appear to be having a fair number of them back to our house later in the day. Quite how many remains something of a mystery although I have a feeling my wife knows a little more than she is letting on. Lets hope the rain stays away and they can all stand outside.

Have a terrific weekend if we do not speak before

- 09.00 ECBs de Guindos speaks

- 12.15 BoEs Pill speaks

- 15.00 US Michigan sentiment survey

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