BOE hikes but messaging is mixed

The Bank of England voted to raise the UK base rate by 50 basis points to 3.5% yesterday but that was on a split decision. Of the nine member committee, six voted for the 50 basis points, one voted for a 75 basis point hike and two members voted to keep the rate unchanged. As you might imagine, that kind of disagreement on policy unsettled the markets and sterling had a bad day at the office. The GBPUSD rate, which was above $1.24 on Wednesday, is down to $1.2170 this morning and the GBPEUR rate dropped 2 full cents to this morning’s €1.1438. There were similar drops in other pairs; GBPCAD is down to CAD 1.6617 and GBPNZD is 2.5 cents lower at NZD 1.9145. This morning’s UK retail sales data hasn’t helped the pound. That was all worse than forecast in November. If the batch of UK purchasing managers indices, due for release at 9.30am, are as bad as expected, sterling could be battered again before the day is over. GBP sellers may wish to act early to avoid disappointment.

ECB hikes and talks of more

The European Central Bank delivered a 50 basis point interest rate hike yesterday and committed to further aggressive monetary policy action in spite of the risk of tipping Europe into recession. Obviously the war on Europe’s borders and its impact on energy and food supplies is a major factor when it comes to the potential eurozone recession but tighter monetary policy is just as impactful. The euro had a very volatile day. as mentioned above, it strengthened against the embattled pound but, in spite of the wild trading during Thursday, the EURUSD rate is roughly where it was this time yesterday at $1.0630. Euro traders will be watching today’s purchasing managers indices and the consumer price inflation data; all of which is due for release this morning.