Pound rises on interest rate expectations
Strong UK jobs data; a tight labour market and strong upward pressure on private-sector wages allowed the Pound to rise on expectations that the Bank of England would take a more aggressive stance on interest rate hikes. Also contributing to the Sterling glow was a firmer risk appetite and as the Pound recovered further short position covering pushed it further.
Liz Truss announced plans to ignore the significant parts of the Northern Ireland protocol leading to fears the EU would retaliate with stricter border controls. The reaction was muted as markets hope that negotiations will continue
ECB’s Knot stated that a 0.5% July rate hike is possible if inflation broadens and (US) Fed Chair Powell stated that this is a time for a laser-focussed approach on bringing inflation down and that 0.5% increases will be on the table at the next couple of meetings. So it’s still all about the interest rate rises, and will be for some time yet, sorry folks!
Sterling maintained momentum, peaking close to 1.2500 against the dollar and 1.1900 against the Euro.
This morning’s headlines will scream that UK inflation increased to 9.0% for April; the highest reading for 40 years, but slightly lower than the forecast 9.1%. The fact the markets expected an even higher figure means Sterling has corrected slightly to near 1.2470 against the dollar and the Euro around 1.1840.