Traders betting on more rate increases from the BoE
Monday 3 April, 2023
Daily Currency UpdateThe British public's expectations for inflation, a crucial indicator for the Bank of England as it weighs another interest rate hike, cooled in March, with expectations for inflation in 12 months' time eased to 5.4%, down from 5.6% in February, while expectations for the longer term slipped to 3.7% from 3.8%.
Traders are betting there is a 75% chance that interest rates will increase by 25 basis points in May. They are pricing a 52% chance of another hike of the same amount in June. To support this, Bank of England Governor Andrew Bailey announced last week that the UK financial system was ‘resilient’ and ‘liquid’ and that the turmoil would not derail further rate increases.
Key MoversThe US dollar has been trading broadly higher against most currencies as fears over inflation resurfaced after a surprise announcement by major oil producers to cut production further, with traders betting that the Federal Reserve may need to increase interest rates at its next meeting.
The announcement from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, comes after data on Friday showed US consumer spending rose moderately in February after surging the prior month, with inflation showing some signs of cooling even as it remained elevated.
- GBP/USD: 1.2285 - 1.2365 ▲
- GBP/EUR: 1.1335 - 1.1395 ▲
- EUR/USD: 1.0805 - 1.0885 ▲