Treasury Market Commentary –

Analysts expect BoE to cut rates 0.75% in 2024

A weekly economic update from our Treasury team.

Published

8th December 2023

Category

Macro Commentary

The market is ramping up the expected pace of interest rate cuts over the coming year as inflation continues to drop and stimulating economic growth becomes the focus for central banks.

The Bank of England meets next week, with no change expected now until around mid-2024 when the rate cutting cycle is expected to start, with markets currently pricing in almost 75bps of cuts.

The central bank is likely to stick to its ‘higher for longer’ mantra which has been underpinning sterling strength, although we still expect the rate decision vote to be a split.

In the US, weaker jobs data this week has reinforced the view that the Fed will need to cut rates aggressively from early next year to offset a weakening economy, with no change in policy expected at next week’s meeting.

The vitally important US payrolls data, due today, is a key gauge of underlying economic performance, and remains pivotal to central bank policy, which may lead to increased short-term volatility.

The European Central Bank also meets next week and is expected to hold, with markets forecasting they will be first to begin easing monetary policy, perhaps as early as March, as the economic data continues to disappoint. The weakening growth outlook for China is further dragging on the European economy.

Geopolitics is increasingly likely to be a key driver of market sentiment over the coming year, with Gold hitting a record high this week.

Liquidity will start to dry up as we approach year-end which may lead to exaggerated market moves.

GBP/USD – 1-year chart

Graph GBP/USD Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

12/12/23

UK Average Weekly Earns. 3M/YoY

7.9%

n/a

12/12/23

UK Claimant Count Rate

4.0%

n/a

12/12/23

US CPI YoY

3.2%

3.1%

13/12/23

US FOMC Rate Decision (Lower Bound)

5.25%

5.25%

14/12/23

UK Bank of England Bank Rate

5.25%

5.25%

14/12/23

EU ECB Deposit Facility Rate

4.00%

4.00%

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2565

USD/JPY

144.00

GBP/EUR

1.1650

AUD/USD

0.6605

EUR/USD

1.0790

USD/CHF

0.8745

GBP/AED

4.6150

XAU/USD

2030

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7518

+0.90%

S&P

4585

+19.43%

EUROSTOXX

4473

+17.93%

Central Bank Key Deposit Rates

BOE

FED

ECB

5.25%

5.25%

4.00%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+4.60%

5-year

+4.01%


View Arbuthnot Latham’s Private and Commercial deposit rates.

This document should be considered a marketing communication for the purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. The information given in this document is for information purposes only and is not a solicitation, or an offer to buy or sell any security or any other investment or banking product. It does not constitute investment, legal, accounting or tax advice, or a representation that any investment or service is suitable or appropriate to your individual circumstances.

You should seek professional advice before making any investment decision. The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money invested. Past performance is not a reliable indicator of future results. Investment returns may increase or decrease as a result of currency fluctuations.

The facts and opinions expressed are those of the author of the document, as of the date of writing and are liable to change without notice. We do not make any representations as to the accuracy or completeness of the material and do not accept liability for any loss arising from the use hereof. We are under no obligation to ensure that updates to the document are brought to the attention of any recipient of this material. Please note that this commentary may not be reproduced, distributed, disseminated, broadcasted, sold, published or circulated without prior consent from Arbuthnot Latham & Co., Limited. Arbuthnot Latham & Co., Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

 

 

Weekly

Treasury Market Commentary

Would you like to receive Arbuthnot Latham’s weekly Treasury Market Commentary directly to your email inbox? Click the button to subscribe to our email newsletters.

Subscribe to our newsletters

Contact Details

London Office

+44 (0) 20 7012 2599

DG-FX@arbuthnot.co.uk