Treasury Market Commentary –

BoE leaves further rate rises on the table

A weekly economic update from our Treasury team.

Published

22nd September 2023

Category

Macro Commentary

The Bank of England held rates at 5.25% this week, whilst insisting further tightening remains on the table and rates would remain at higher levels for ‘sufficiently long’. It was a narrow 5-4 vote in favour of the pause, with most analysts now expecting rates to stay at this level well into next year.

The committee saw increasing signs that the aggressive tightening cycle is affecting the jobs market and the growth outlook, with much of the past year’s hikes still to feed through to borrowers.

UK inflation unexpectedly fell to its lowest level in 18 months with the headline rate easing to 6.7%, though this remains uncomfortably high, and way above the 2% target.

The US central bank, meanwhile, also kept policy on hold, and although a further hike later this year remains live, most forecasters think rates have already peaked. The vote to keep policy unchanged was unanimous, with the Fed signaling rates would stay higher for longer into next year.

In Europe, the central bank has also likely reached peak rates following last week’s hike, with unchanged monetary policy priced until late 2024, when an initial rate cut is expected.

On the exchanges, dollar strength continues to drive momentum, with GBP/USD trading at new 6-month lows below 1.2300, whilst GBP/EUR has dropped to the lower end of the well-established 1.1500 – 1.1750 range.

GBP/USD – 1-year chart

Graph GBP Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

28/9/23

US GDP Annualised QoQ

2.1%

2.3%

29/9/23

UK GDP QoQ

0.2%

n/a

29/9/23

UK GDP YoY

0.4%

n/a

29/9/23

UK Mortgage Approvals

49.4k

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2280

USD/JPY

148.30

GBP/EUR

1.1520

AUD/USD

0.6425

EUR/USD

1.0660

USD/CHF

0.9055

GBP/AED

4.5100

XAU/USD

1918

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7680

+3.07%

S&P

4330

+13.23%

EUROSTOXX

4212

+11.04%

Central Bank Key Deposit Rates

BOE

FED

ECB

5.25%

5.25%

4.00%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+5.14%

5-year

+4.50%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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