Markets price in May rate hike
Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann stated that raising interest rates now means that less hikes are required later, noting inflation will likely stay above the 2% target for longer than expected. BoE Governor Andrew Bailey stated that the bank is treading a very tight line between taming inflation and heaping greater woe on the economy, with the labour market key to whether there would be an easing of very tight conditions. Markets continue to price in a further UK rate hike in May, but expectations have reduced for the year as a whole.
Dollar trends dominated as Sterling retreated to near 1.3025 overnight as the Euro edged higher. Fed Chair Powell said that a 0.5% rate increase is on the table for next month, that there’s merit in ‘front-end loading’ rate moves and James Bullard also discussed the possibility of a 0.75% hike
This morning UK consumer confidence dipped sharply for April with the second-lowest reading on record and GBP has struggled since the release of the retail sales data this morning, with GBPUSD falling c.0.6% to trade below 1.2950 with the Euro around 1.2000.
Today’s focus now turns to the French election, with Macron’s lead stretching after he accused Le Pen of being in the employ of the Russians. Politicians in Germany, Spain and Portugal have also advocated choosing anyone but Le Pen.