Published: Sat, February 10, 2018
Markets | By Erika Turner

GBPUSD Surges on Hawkish Bank of England

GBPUSD Surges on Hawkish Bank of England

Many savings accounts are already loss-leaders for banks and building societies and so they are less likely than mortgage lenders to pass on any rise in interest rates. Over the past year, stocks, particularly in the US, have seemingly been on a never-ending rise with little pullback.

The FTSE 100 was 0.94 percent down at 7,210.80 points as of 12:39 GMT on Thursday, 08 February 2018.

Whether this fall will be enough to stop the Pound's current surge remains to be seen, however - it is entirely possible that markets will be more interested in today's hawkish comments, thus extending GBP/EUR's lead into the weekend.

Around 8.1 million United Kingdom households have a mortgage, and of those nearly half are on either a standard variable rate or a tracker rate.

High inflation is the Bank of England's main reason for wanting to raise rates. The first interest rate rise since 2008 in the United Kingdom occurred in November 2017, going from 0,25 percent to 0.5 percent.

Its forecasts at the time indicated there could be two more increases of 0.25% over three years.

'Were the economy to evolve broadly in line with the February inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November report'.

The Swiss bank UBS admits the outlook for the United Kingdom is not as bad as it thought and says the economy is well-positioned to benefit from strong global growth.

"As well as this crucial fact, the rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the United Kingdom".

Combined, markets have now overwhelmingly come to expect a rate increase from the bank as early as May - a prospect that sent the Pound flying.

Netanyahu lashes out against police ahead of expected corruption probe announcement
Benjamin Netanyahu's wife, Sara, was also being investigated for misusing funds. Another probe involved a submarine deal with Germany worth billions of dollars.

But not everything in the garden is rosy.

With the end-March 2019 Brexit deadline little more than a year away, Carney has just set up a smooth-Brexit hurdle for the government to trip over.

We are driving along with the hand brake half on.

Unemployment is at its lowest for 43 years and, finally, wages are starting to pick up - as one would expect when the jobless rate is so low.

And, because of the UK's mediocre productivity record, the predicted rise in average earnings is, in the MPC's opinion, likely to feed into higher inflation.

"Although interest rate rises are often unwelcome news for equity investors - particularly in a country which relies on the consumer for much of its economic growth - they are also a sign that the economy is doing well".

The Bank of England today upgraded its growth forecast for the British economy next year - but warned borrowers to be braced for interest rate hikes. Britain's economy is now expected to grow by 1.7% in 2018, up on the previous 1.5% estimate.

The Bank, along with its Project Fear-spouting Governor Mark Carney, joins the International Monetary Fund, the OECD, the European Union and the Treasury in having to eat their gloomy words about what voting to leave the European Union would do to the country.

Hawkish BoE Message Prompts GBP CAD Exchange Rate UptrendThe quarterly Inflation Report offered the Pound further cause for confidence, with the BoE revising its economic forecasts higher.

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