Treasury Market Commentary –

BoE chief firm on higher rates

A weekly economic update from our Treasury team.

Published

1st December 2023

Category

Macro Commentary

Governor Andrew Bailey remains concerned with the supply side of economic growth, he reiterated that the central bank would ‘do what it takes’ to get inflation to the 2% target, but warned the journey down now from 4.6% could be slow and therefore, interest rates will continue to remain higher. Bank of England figures show mortgage approvals rose to around 47,400 in October, this means that mortgage approvals are down by more than a third since August 2022.

Meanwhile in the US, Federal Reserve officials made fresh hints of interest rate cuts. US Fed Governor Christopher Waller stated during an event at the American Enterprise Institute, that if progress continues for several more months’, then the FED could start lowering policy rates next year if inflation continues to fall.

In the Eurozone, inflation cooled more than expected, putting the 2% target in sight as investors step up bets that the European Central Bank will cut interest rates sooner than officials suggest. Consumer prices rose 2.4% from a year ago in November — down from 2.9% the previous month and less than the estimates of all economists. The ECB could look to cut rates now as early as April 24.

GBP/USD broke past the 1.2700 level this week, the highest it has been since Mid-August 23, whilst GBP/EUR remains very much within the well-established 1.1500 – 1.1600 range.

GBP/EUR – 1-year chart

Graph GBP/USD Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

05/12/23

S&P Global/CIPS UK Composite PMI

50.1

n/a

05/12/23

S&P Global US services PMI

50.8

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2655

USD/JPY

147.95

GBP/EUR

1.1615

AUD/USD

0.6620

EUR/USD

1.0895

USD/CHF

0.8745

GBP/AED

4.6500

XAU/USD

2042

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7489

+0.51%

S&P

4567

+13.61%

EUROSTOXX

4362

+12.93%

Central Bank Key Deposit Rates

BOE

FED

ECB

5.25%

5.25%

4.00%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+4.73%

5-year

+4.16%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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