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Today Bank of England policymakers are to announce the latest interest rate decision, which is expected to slow to a 25-basis point rise
After a strong week, the pound was rocked on Thursday following the Bank of England’s decision to raise interest rates by 50 basis points to 5.0%. This rise exceeded market expectations of a 25 basis point rate hike. It wasn’t however, a total surprise as suspicions of a higher rate hike were high, following stubbornly high UK inflation figures on Monday.
The decision was not taken lightly by the Bank’s monetary policy members, who were split seven to two, in favour of the proposed 50 basis point rise.
Despite losses against the euro in anticipation of the Bank of England’s interest decision, the pound has regained some strength this morning and approaches the weekend largely unchanged from this time last week.
The end of this week saw the pound-to-US-dollar rate seesaw, which continued following the BoE decision. The exchange rate approaches the weekend close to 0.57% lower overall on the week, but it remains close to 2.5% higher than this time last month.
Yesterday, gold dropped in value to $1,920 per ounce, extending the week’s losses to the lowest value seen in over three months as the hawkish outlook continues for the world’s major central banks.
In the US, the number of Americans filing for unemployment benefits was 264,000 on the week ending 17 June. This was above market expectations and suggests some softening in the US labour market.
Stocks in the US fell for a fourth consecutive session yesterday with the three major stocks losing nearly 0.3%.
It was a similar story for both UK and European shares, which also extended losses yesterday after a hawkish mood spooked investors.
Today, key data releases include UK retail sales and manufacturing, services and composite CPI for the UK and US.
Next week, we have German Ifo business climate figures to look forward to and the country’s June inflation reading. American economists will be looking out for US Durable Goods Orders on Tuesday, further Federal Reserve speeches, and personal spending results on Friday.
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GBP: Consumer confidence & retail sales results
The Gfk Consumer Confidence figures for June came in at -24, showing an increase from -27 in May. Also, this morning UK retail sales rose unexpectedly in May by 0.3% from the previous month, exceeding expectations of a -0.3% decline.
GBP/USD: the past year
EUR: Losses for EU shares
European stock markets extended losses for a fifth consecutive session on Friday with benchmark indexes approaching their worst week of losses since March. This comes after the Bank of England’s surprise 50-basis point rise and suggestions of further rate hikes from the ECB and Fed heightened investor concerns.
USD: 6-month high against the Japanese yen
Following a strong rally yesterday, the US dollar soared during the Asian session on Friday, taking the current rate to a fresh high, not seen since November 2022.
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