Sterling firmer post BOE meeting

Sterling is firmer following last week’s Bank of England policy meeting –  it has jumped to over $1.24 against the dollar and is trading at just over 86.5p against the euro

The Bank of England’s MPC left interest rates unchanged at 0.25% but one member voted for an immediate quarter point hike. Moreover,  ‘some’ other members noted that it wouldn’t take a lot for them to consider that an interest rate increase might be warranted

The Fed’s policy statement last Wednesday set the tone for markets over the second half of last week. Though it raised interest rates by 25bps, it guided ‘only’ two more quarter point increase over the remainder of the year, less than the market expected and prompting a fall in both the dollar and US bond yields. The former shed more than 1.5% against a basket of currencies, and the latter fell by up to 13bps on the week

The euro is  trading north of $1.0750 against the dollar, buoyed both by the outcome of the Dutch election and comments from ECB member Nowotny, who said the deposit rate (currently -0.4%) could be increased before any hike in the main interest rate (currently 0%)

Data due this week include CPI and retail sales in the UK, on Tuesday and Thursday respectively, with the consensus expecting the CPI data to show the annual rate of inflation accelerating to 2.1% in February (above the BOE’s target of 2%)