UK watch: higher inflation dents BoE cut hopes
STOXX 600 up 0.3%
Autos fall, tech stocks rise
UK inflation surprises to upside
Trump picks, geopolitics in focus
S&P futures higher before Nvidia earnings
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UK WATCH: HIGHER INFLATION DENTS BOE CUT HOPES
Consumer price inflation rose by an annual 2.3% in Britain last month, taking the rate above the BoE's 2% target after it dropped below that level in September for the first time since 2021.
That was 10 bps above a survey of economists polled by Reuters and 10 bps above the BoE's forecast too, unwelcome news for the central bank's policymakers as they look to lower interest rates further after two cuts this year.
"The upside surprises to headline as well as core inflation and services prices provide even more evidence that the Bank of England is on the right track with its 'go-slow' approach to rate cuts," said Peel Hunt chief economist Kallum Pickering.
Futures markets imply only a 15% chance that the BoE cuts interest rates again in December, while around 60 bps of easing is priced by the end next year, suggesting just two quarter-point rate cuts and around a 40% chance of a third.
In contrast, markets are pricing three full quarter-point cuts from the Fed by the end of 2025 and over five from the ECB.
What does that mean for the pound?
The currency is rising today against the euro but is a touch softer against a resurgent dollar =USD that is up near its highest level against a basket of currencies in about a year.
Dankse Bank strategists expect the tailwinds that have supported the pound this year to continue to prevail.
"GBP remains supported by the BoE's cautiously hawkish stance and UK growth outperformance relative to the eurozone," Danske Bank writes.
"We expect these forces to keep weighing on the cross (euro-sterling) in the coming months."
They see the euro dropping to 81 pence EURGBP=D3 over a six-month horizon, from its current level of 83.31 pence.
(Samuel Indyk)
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FOR WEDNESDAY'S OTHER LIVE MARKETS POSTS:
RISING BOND YIELDS NO PROBLEM FOR EQUITIES - UBS CLICK HERE
TECH STOCKS LIFT STOXX AS REAL ESTATE DRAGS CLICK HERE
BRITISH INFLATION SET TO DOMINATE BEFORE NVIDIA CLICK HERE
FTSE FUTURES FALL BEHIND AFTER INFLATION RISES CLICK HERE
Bitcoin hits $94,000 for the first time https://reut.rs/4hTEauj
Nvidia earnings moves https://reut.rs/4fvAOff
UK inflation rises by more than expected in October https://reut.rs/4fVepYD
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