Nearly the weekend….
As per yesterdays nudge in your inbox, today is the UK’s interest rate decision at midday. The Monetary Policy Committee is expected to raise rates but there remains a degree of uncertainty as to whether the hike will be a regular 0.25% increment or a larger 0.50% move. Money market pricing shows investors are fully priced for a 0.50% hike, therefore an initial sell-off would result from a 0.25% hike. However in my experience most of the volatility will occur during the statement directly afterwards. Usual buzz words will no doubt set the tone; inflation, recovery, wage expectations, cost of living etc etc. If a decent hike is coupled with negative rhetoric, expect the majority of the gain (or loss depending if you’re selling GBP) to diminish.
It’s really important if you have exposure against GBP to drop me a call before midday.
Still heavily focussed around the gas supply issues from Russia, if we see a strong interest rate decision today and poor sentiment surrounding Europe, expect to see the rate back up into the 1.20’s.
As mentioned on Tuesday, non-farm payrolls out tomorrow. Nothing to report today that side of the pond.
Have a good all