Pound, UK stocks get a lift from BoE's rosy rate view
BoE's second rate cut since 2020
Sterling rallies sharply; 2024's best major currency performer
BoE's Bailey now sees inflation returning to target mid-2027
Sterling may lose sheen if markets start to expect faster rate fall
Updates with comments, adds graphic; refreshes prices at 1452 GMT
By Yoruk Bahceli and Amanda Cooper
LONDON, Nov 7 (Reuters) -Sterling rallied sharply on Thursday, solidifying its position as the best performing major currency of 2024, while UK-focussed stocks rose after the Bank of England cut rates but indicated future cuts may be more gradual than many had thought.
The BoE, which delivered its second rate cut since 2020, said that after Labour Party finance minister Rachel Reeves' high-tax, high-spend budget last week, it expected higher inflation and growth.
London-listed shares of mid-sized companies touched session highs .FTMC, while UK government bonds headed for their best one-day performance in almost a month, reflecting investor demand for sterling-denominated assets.
Sterling rose by as much as 0.78% to $1.298 after the decision GBP=D3, while two-year gilt yields fell 6 basis points to 4.448%, as bond prices rose GB2YT=RR.
The Monetary Policy Committee (MPC) voted 8-1 to cut rates to 4.75% from 5%, a stronger majority than expectations in a Reuters poll for a 7-2 vote in favour of a cut.
The BoE predicted last week's budget, which contained big increases in tax, spending and borrowing - would boost the size of Britain's economy by around 0.75% next year but barely improve annual growth rates in two or three years' time.
It said the budget was likely to add just under half a percentage point to the rate of inflation at its peak in just over two years' time, causing inflation to take a year longer to return sustainably to its 2% target.
Right now, money markets show traders believe UK rates could fall by just over half a percent next year - something economists and analysts believe is too tame, given the BoE's predictions predate the rise in gilt yields and the shift in market borrowing rates following the budget.
"Remember, markets are pricing fewer than three rate cuts from here on in," James Smith, developed markets economist - UK, at ING said.
"We don't think that sounds particularly realistic. Our view is that rate cuts will be cut at every meeting from February until rates reach 3.25% next autumn."
British inflation has proven far more stubborn than that in other developed nations, particularly where wages and the services sector are concerned.
Governor Andrew Bailey said the BoE now saw inflation returning to target by mid-2027, from a previous estimate of mid-2026.
“That information was made less useful because it probably wouldn’t look quite like that if they took into account the market’s repricing in the wake of the budget,” Rabobank senior rates strategist Lyn Graham-Taylor said.
UK rates remaining higher for longer and then falling more slowly than elsewhere has been a key driver for sterling.
The pound is the best-performing major currency against the dollar this year, up 2% with Thursday's rally.
Sterling could lose that sheen, especially if markets adjust to the view that British rates could fall faster, analysts said.
"I think that will become clear as peers, such as the U.S., begin to outpace the UK to a more significant degree, although the near-term sugar rush from the Budget might mask that for a short while," Pepperstone senior research strategist Michael Brown said.
Sterling ahead of the pack https://reut.rs/4fCjjtC
Britain's inflation and interest rates https://reut.rs/4fwDybO
Additional reporting by Samuel Indyk; Editing by Alun John, Dhara Ranasinghe and Ros Russell
Asset collegati
Ultime news
Disclaimer: le entità di XM Group forniscono servizi di sola esecuzione e accesso al nostro servizio di trading online, che permette all'individuo di visualizzare e/o utilizzare i contenuti disponibili sul sito o attraverso di esso; non ha il proposito di modificare o espandere le proprie funzioni, né le modifica o espande. L'accesso e l'utilizzo sono sempre soggetti a: (i) Termini e condizioni; (ii) Avvertenza sui rischi e (iii) Disclaimer completo. Tali contenuti sono perciò forniti a scopo puramente informativo. Nello specifico, ti preghiamo di considerare che i contenuti del nostro servizio di trading online non rappresentano un sollecito né un'offerta ad operare sui mercati finanziari. Il trading su qualsiasi mercato finanziario comporta un notevole livello di rischio per il tuo capitale.
Tutto il materiale pubblicato sul nostro servizio di trading online è unicamente a scopo educativo e informativo, e non contiene (e non dovrebbe essere considerato come contenente) consigli e raccomandazioni di carattere finanziario, di trading o fiscale, né informazioni riguardanti i nostri prezzi di trading, offerte o solleciti riguardanti transazioni che possano coinvolgere strumenti finanziari, oppure promozioni finanziarie da te non richieste.
Tutti i contenuti di terze parti, oltre ai contenuti offerti da XM, siano essi opinioni, news, ricerca, analisi, prezzi, altre informazioni o link a siti di terzi presenti su questo sito, sono forniti "così com'è", e vanno considerati come commenti generali sui mercati; per questo motivo, non possono essere visti come consigli di investimento. Dato che tutti i contenuti sono intesi come ricerche di investimento, devi considerare e accettare che non sono stati preparati né creati seguendo i requisiti normativi pensati per promuovere l'indipendenza delle ricerche di investimento; per questo motivo, questi contenuti devono essere considerati come comunicazioni di marketing in base alle leggi e normative vigenti. Assicurati di avere letto e compreso pienamente la nostra Notifica sulla ricerca di investimento non indipendente e la nostra Informativa sul rischio riguardante le informazioni sopra citate; tali documenti sono consultabili qui.
