Sterling 'jumps' after BoE raises rates to 4% but gains quickly fade

Matthew Ryan, CFA Ebury

The Bank of England raised bank rate a quarter point to 4%, by an 8-1 vote, with Catherine Mann the only dissenter pushing for a half-point. It said more may come, with inflation expected to approach 5% by mid-2027 driven by energy costs.

Sterling jumped on the decision, but the gains faded within hours as haven buying favoured the Franc.

The committee sounded less united on how far to go than the vote suggests, and we suspect the three further hikes priced in by markets are more than the MPC will actually deliver. Bailey’s speech Monday and Thursday’s GDP release are the next chances to test that.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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