The rising concerns over the global economic outlook of the past few weeks and yesterday’s fall in UK inflation have put shot to many rate expectations and you can certainly kiss goodbye to any rate hikes by the Bank of England this year. In the US, the correction in expectations has been most pronounced as pointed out by Simon in his note this morning where he talks about how the US 2 year bond yields have plunged. The Federal Reserve remains clear and consistent in saying that its decisions are data dependent, but it’s not mentioned anything about being sentiment dependent. Sentiment in the markets is a powerful phenomenon which has the potential to knock confidence, so going forward data on both sides of the Atlantic will be keenly watched to see if these US and UK economic booms are sustainable.
This morning’s UK unemployment figure has once again surprised to the downside with the rate falling to 6.0%, below the expected decline to 6.1% and is welcome news but is unlikely to sway any more MPC members to vote for rate hikes beyond the existing two that have. We wait to see what the release of next Wednesday’s minutes reveal but with inflation tumbling, key business and confidence surveys also coming off the boil and wage inflation still subdued, rate expectations for the BOE have been pushed right back. Cable (GBPUSD) initially rallied 30 points or so on the back of the figures just now, but already that move higher has fizzled out, showing what the market now thinks, which is rates lower for longer.
This morning’s UK unemployment figure has once again surprised to the downside with the rate falling to 6.0%, below the expected decline to 6.1% and is welcome news but is unlikely to sway any more MPC members to vote for rate hikes beyond the existing two that have. We wait to see what the release of next Wednesday’s minutes reveal but with inflation tumbling, key business and confidence surveys also coming off the boil and wage inflation still subdued, rate expectations for the BOE have been pushed right back. Cable (GBPUSD) initially rallied 30 points or so on the back of the figures just now, but already that move higher has fizzled out, showing what the market now thinks, which is rates lower for longer.
Recommended Content
Editors’ Picks
AUD/USD risks a deeper drop in the short term
AUD/USD rapidly left behind Wednesday’s decent advance and resumed its downward trend on the back of the intense buying pressure in the greenback, while mixed results from the domestic labour market report failed to lend support to AUD.
EUR/USD leaves the door open to a decline to 1.0600
A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Bitcoin price shows strength as IMF attests to spread and intensity of BTC transactions ahead of halving
Bitcoin (BTC) price is borderline strong and weak with the brunt of the weakness being felt by altcoins. Regarding strength, it continues to close above the $60,000 threshold for seven weeks in a row.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.