Treasury Market Commentary –

BoE chief hints at longer term higher rates

A weekly economic update from our Treasury team.

Published

24th November 2023

Category

Macro Commentary

Last Wednesday’s drop in inflation to 4.60% was a clear turning point in Britain’s recent economic story. Andrew Bailey, the Governor of the Bank of England, has also warned that UK inflation may not continue to fall as quickly as some are now predicting. He also reiterated that it was far too early to be thinking about rate cuts and that the bank was still concerned over the ‘potential persistence’ of inflation. We also did not see anything in the budget that would appear to change this view.

Meanwhile in the US, Federal reserve officials were unwilling to conclude they were done raising rates. They decided earlier this month to extend a pause in rate increases. Minutes of the recent policy meeting suggested they might be comfortable holding rates steady for at least the rest of the year. Analysts continue to look ahead and are considering when the central bank will be able to lower rates next year.

Sluggish growth in the euro-zone economy is threatening to amplify risks to financial stability posed by higher interest rates, the European Central Bank (ECB) warned. As the impact of the ECB’s historic monetary-tightening campaign continues to unfold, household incomes, corporate revenues and public finances could feel an additional squeeze if the economy continues to disappoint.

GBP/USD hit highs of 1.2550 this week, whilst GBP/EUR remains wells supported at the 1.1500 level.

GBP/USD – 1-year chart

Graph GBP Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

29/11/23

UK Mortgage Approvals

43.3k

n/a

30/11/23

EU CPI Core YoY

4.2%

3.9%

*Bloomberg survey / Not available  

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2545

USD/JPY

149.55

GBP/EUR

1.1500

AUD/USD

0.66560

EUR/USD

1.0905

USD/CHF

0.8840

GBP/AED

4.6100

XAU/USD

1992

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7489

+0.51%

S&P

4556

+14.33%

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

+4.88%

5-year

+4.33%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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