Jump to content

UK rates to top 1% as BoE tightening continues


Recommended Posts

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.

Bank of EnglandSource: Bloomberg
 
 Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 03 May 2022 

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.

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.

GBP/USD chartSource: ProRealTime
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Allow me to unveil the revolutionary Lifeform project – a groundbreaking development in the realm of virtual identities and avatars for the web3 world.   At its core lies a mind-bogglingly innovative concept. They've developed a state-of-the-art editor that empowers users to create hyper-realistic 3D virtual human avatars, which can serve as digital identities across the metaverse and web3 applications. Brace yourself for a staggering number – over 10 billion possible combinations of facial features and body details, all powered by the cutting-edge Unreal Engine 5, the very same technology behind blockbuster movies and top-tier video games. Impressive, isn't it? But here's the real kicker – these avatars aren't merely for virtual worlds. With Lifeform's DID solution, you can actually utilize your custom avatar as a login method and verified identity for any decentralized app or metaverse platform. It's an NFT-based digital ID that seamlessly grants you access to the entire web3 ecosystem. Remarkably, as early as March 2023, Lifeform had already become the most widely used dApp on the BNB Chain, boasting over 3 million monthly active users. This rapid adoption is a testament to the virtual identity concept's meteoric rise. On top of that, their AI analyzes user activity across blockchains, providing personalized service recommendations based on your crypto asset management strategies. It's a sleek, all-in-one web3 identity platform like no other. And the surprises don't end there. These avatars aren't limited to the metaverse; you can beam your virtual self into Zoom calls, Google Meet, online conferences – you name it. Your avatar mimics your movements and expressions in real-time, courtesy of their cutting-edge plugin. It's like being a real-life hologram! Lifeform is single-handedly bridging the gap between our physical and digital identities in an incredibly accessible manner. They are undoubtedly the key to onboarding the next billion users into the web3 space. It's a genius concept, if you ask me. You can check out it's token $LIFEFORM on the Bitget exchange as it recently got listed. 
    • Ready to experience the power of the latest Telegram Signal Bot? Explore the exchange BetterTest Event and witness the potential for yourself! Experience firsthand the accuracy and efficiency of a unique signal bot in real-time trading scenarios. Test its capabilities and see how it can enhance your trading experience. Why Participate? - Refine User Experience: Help us improve the product by providing valuable feedback. - Enhance Audience Reach: Leverage your dedicated audience channels more effectively. - Community Management: Intuitively manage your communities and improve follower quality. - Top Channel Management Tool: Collaborate with us to create an industry-leading platform. Will you miss this opportunity to engage with exchange cutting-edge technology and take your trading to the next level?
    • Memecoins are super volatile, but if you're holding from here, keep an SL at break even & chill!
×
×
  • Create New...
us