ECB and BoE hike again

The euro and sterling have lost ground against the dollar notwithstanding another round of 50bps increases in interest rates from both the ECB and Bank of England (BoE) yesterday, weakening to just under $1.09 and and a touch below $1.22 respectively. This in turn sees the single currency-pound exchange rate trading at almost 89.5p this morning

In government bond markets, German and UK 10-year yields have fallen post the central bank interest rate announcements, down around 15 basis points and 25 basis points to 2.10% and 3.35% respectively. Meanwhile, equivalent US yields are largely unchanged at 3.50%

The ECB raised interest rates by 50bps as expected. It said it intended to hike them by another 50bps at its March meeting, at which stage it would then “evaluate the subsequent path of our monetary policy”, though Christine Lagarde indicated further rate increases could follow. For its part, the market currently thinks another 75bps in total and the ECB will be done

The BoE hiked rates by 50bps (to 4%) as well – again as expected – and said if domestic price and wage pressures prove persistent, “then further tightening of monetary policy would be required”. The market expects another 25bps hike in rates before they top out at 4.25%

The main economic release today is the payrolls report in the US. The consensus expects the economy to have added around 190k jobs in January, with the unemployment rate seen ticking up to 3.6% and the year-on-year growth in hourly earnings dipping (again) to 4.3%