Bank of England hikes by 50bps

The euro has gained some ground against both the dollar and sterling to trade north of $1.02 and above 84p respectively this morning, while the pound is trading a bit below $1.22 against the dollar

European equity markets chalked up modest gains yesterday, while government bond yields have nudged down with German and US 10-yields now at 0.80% and just below 2.70% respectively

The Bank of England (BoE) has upped the pace of monetary tightening, increasing interest rates by 50bps to 1.75% following yesterday’s meeting to bring the cumulative increase since last December to 165bps. It will also begin selling some of the government bonds it bought during its past quantitative easing (QE) from September

The BoE now expects inflation to peak at over 13% later this year, coming down only slowly next year, and sees the economy falling into recession from the fourth quarter and remaining in recession through 2023. And while it says monetary policy is not on a pre-set path, it again warned that it “will be alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response”

The main data release today is the July employment (payrolls) report in the US, with the consensus expecting job gains of around 2.5% last month and the unemployment rate to hold steady at 3.6%