BOE interest rate hikes may come soon

interest ratesAs anticipated, the MPC Official Bank Rate Votes remained at 0-0-9. The nine members of the Monetary Policy Committee voted unanimously to keep the rates constant for another month. An interesting fact is that the Bank of England policymakers sounded more bullish on the Euro zone. Another unanimous agreement among the memebers is that the next move in rates is likely to be an increase and once again a minority of policy makers said the decision to keep interest rates at a record-low in April was “finely balanced”. The market certainly took this as good news with the pound rallying after the release and ending the day higher. 10-year government bond yield also climbed 15bp, to 1.71% marking the highest since March 13 following anticipation that BOE interest rate hikes may come soon. With the May eletions knocking on the door, this could be the last insight we get from the BOE policymakers before the elections.

Yesterday, Australia’s CPI came higher than the forecast 0.2%. This was perceived as good news, since higher inflation eases pressure on the Reserve Bank of Australia to the further cut of interest rates. The Aussie advanced against all its major peers after the release. The Aussie strengthened against the NZD, moving away from parity with the kiwi dollar following the consumer-price data. This reduced the odds of a policy change next month by the Reserve Bank of Australia. The yen halted a two-day drop versus the U.S. dollar after Japan reported a trade surplus, for the first time in three years. This impact was larger than the expected forecast.

China’s HSBC Flash Manufacturing PMI came at 49.2, slightly lower than forecast of 49.5. The March figure was revised upwards to 49.6 from 49.2 previously released. The disappointing data from China has continued as the April figure comes at a 12-month low. We expect more aggressive stimulus from the China soon following the recent cut in commercial banks’ reserve ratio so as to boost business lending.

Following last month’s UK Retail Sales m/m, which showed Britain’s consumer-led economic recovery remains strong as the figures came at a three month high of 0.7%. The latest figure is forecast to come at 0.4%, suggesting a slower pace of consumer spending in April.

From Europe, we have:

7:00 am GMT: French Flash Manufacturing PMI, French Flash Services PMI and Spanish Unemployment Rate

7:30 am GMT: German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI.

12:30 am GMT: US unemployment claims



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