Sterling loses ground

The pound has lost ground following yesterday’s Bank of England monetary policy meeting, weakening to $1.12 against the dollar and to over 87p against the euro. The latter, meanwhile, has slipped a little against the US currency, to just under $0.98

In government bond markets, US and UK 10-year yields are largely unchanged trading at4.15% and 3.45% this morning, while German 10-year yields have nudged down to around 2.20%.

The Bank of England raised interest rates by 75 basis points to 3.0%, as expected. It said the “majority” of the 9 members of the voting committee expect rates will have to rise further, albeit by less than the market is currently anticipating (which is to a peak of over 4.5%). The Bank also painted a pretty bleak outlook for the UK economy which it sees falling into recession. with inflation seen remaining elevated in the near-term before decelerating from around mid-2023

In the US, the ISM index of services activity dipped in October but at just over 54 is pointing to continuing expansion in this sector of the economy

Today sees the release of the October employment (payrolls) report in the US. The consensus expects job gains of the order of 200,000 jobs last month with the unemployment rate seen nudging up to (a still very low) 3.6%