Home Daily Commentaries Bank of England hikes rates to 4.25%

Bank of England hikes rates to 4.25%

Daily Currency Update

The Bank of England hiked interest rates by 0.25% yesterday bringing the Bank rate to 4.25%, its highest level since 2008. The hike was in line with most forecasts so after some whipsawing in the immediate aftermath of the decision GBP/USD finished the UK trading day around the 1.23 level, close to where it had been at the start. There was an initial push higher as markets digested the 7-2 split in favour of raising rates by the Monetary Policy Committee with some analysts expecting that it would be 6-3. In an unscheduled press conference Bailey commented that the Bank was open to more hikes if necessary and it would act to control persistent pressures. He also however seemed to shrug off Wednesday's surprise rise in CPI saying it could be a one off and still expected inflation to fall sharply in the second half of the year. At present markets are split as to whether we will see another rise to 4.5% at May 11th's policy decision with some expecting rates to now be held for a period. Obviously a lot will hinge on inflation figures between now and then as well as other economic indicators. GBP/USD is down to 1.2240 as the dollar ends the week on the front foot. GBP/EUR sits around 1.1360.

Key Movers

The euro has slipped this morning as some soft Manufacturing PMI numbers from Germany showed the sector has contracted for the ninth month in succession. The miss was worse than expected coming in at 44.4 versus an eyed 47.1. The report put together by S&P Global showed the economy was likely still growing however the services sector was doing the "heavy lifting." The readings for the Eurozone as a whole showed that services printed 55.6, better than expected, with manufacturing at 47.1, worse than expected. EUR/USD which cracked 1.09 for the first time since early February on Wednesday is now back under 1.08. Later today we have PMI data from the States which is expected to mirror the trend in Europe with services expanding and manufacturing contracting. EUR/USD is at 1.0780

Expected Ranges

  • GBP/USD: 1.2180 - 1.2330 ▼
  • GBP/EUR: 1.1280 - 1.1410 ▲
  • GBP/AUD: 1.8300 - 1.8470 ▲
  • EUR/USD: 1.0720 - 1.0860 ▼