Treasury Market Commentary –

UK property cools following rate hikes

A weekly economic update from our Treasury team.

Published

2nd December 2022

Category

Macro Commentary

Market sentiment has turned positive following US central bank chair Powell signalling a slower pace of tightening in the coming months as monetary policy continues to ‘normalise’. A 0.50% hike is expected this month with a forecasted peak of 5% mid-2023, before potential rate cuts later next year.

In the UK, rhetoric from the Bank of England remains hawkish with a further 0.50% rate increase fully priced in for this month, and further hikes expected in the coming months to reach a peak of 4.50%. The UK housing market continues to show signs of cooling with prices dropping 1.4% last month and a significant drop in mortgage approvals as higher rates and the cost-of-living continue to dampen demand.

The European Central Bank are also set to raise rates by at least 0.50% in December as they remain fully focussed on stubbornly high inflation at the risk of a deeper recession.

Events in China continue to be a major focus, but markets remain optimistic that further covid reopening into next year can help underpin global growth.

On the exchanges, conviction levels remain extremely low, and liquidity is likely to drop as traders look to take risk off towards the end of year. The dollar weakened further following the comments from Powell with GBP/USD hitting 1.2250 and GBP/EUR up towards a 3-month high of 1.1700.

Today’s focus is very much on US payrolls data due at 1.30p.m.  

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

5/12/22

UK New Car Registrations YoY

26.4%

n/a

5/12/22

UK S&P/CIPS Services PMI

48.8

n/a

5/12/22

UK S&P/CIPS Composite PMI

48.3

n/a

8/12/22

UK RICS House Price Balance

-2%

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2270

USD/JPY

134.55

GBP/EUR

1.1655

AUD/USD

0.6815

EUR/USD

1.0530

USD/CHF

0.9350

GBP/AED

4.5100

XAU/USD

1800

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7522

+1.88%

S&P

4076

-14.47%

EUROSTOXX

3971

-7.58%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+4.29%

5-year

+3.77%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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