The pound rose to its strongest level against the euro since February 2020 on Wednesday after UK inflation hit its highest level in nearly a decade last month.
The pound added 0.4% against the euro to buy 1.19 euros, taking it to its best week against the euro since January 2021 as markets brace for a December rate hike of the Bank of England while expectations of a similar move by the European Center remained low.
Britain’s annual rate of consumer price growth rose to 4.2% in October, data released on Wednesday showed, more than double the central bank’s target and higher than the central bank’s target. economists. expected up 3.9%.
“There’s a pretty good chance the prime rate will rise to 0.75% next year,” said Dean Turner, UK economist at UBS. %.
The BoE is expected to be the first major central bank to lift borrowing costs after global pricing authorities dragged them to historic lows in early 2020, according to Refinitiv data obtained by transactions. interest rate swaps.
But it is also possible that the Bank of England will keep or lower interest rates in 2023, as consumer willingness to spend is weakened by tax increase, said Turner.
The UK currency also rose the most against the dollar in about a week, buying around $1.34.
The UK benchmark 10-year gold yield, inversely proportional to the price of the government debt instrument, was steady at 0.993%. Yields on this key debt have nearly doubled since early August when the BoE started revised inflation forecasts higher, reducing the attractiveness of fixed-income securities such as government bonds.
Earlier this week, the BoE governor, Andrew Bailey, told a House of Commons committee that he was “very uneasy” about the price hikes in the UK, which have already promoted by Rising energy bills as well as higher old car costs – new car production has been hit by pandemic-related bottlenecks in the semiconductor industry.
European natural gas contracts for December delivery rose 7.2% to €100 per megawatt-hour on Wednesday, starting the year to trade at around €18, moving higher on the back of a recovery in global demand. demand as well as Russia restraining export growth.
London’s FTSE 100 share index, which is stacked from exporters whose profits come under pressure from a stronger pound, fell 0.3%.
The Stoxx Europe 600 index in the region traded sideways near a record high, after a season of better-than-expected corporate earnings that showed major companies were weathering inflationary pressures on clients.
Wall Street’s S&P 500-tracking futures steadied after an index of blue-chip shares closed at an all-time high on Tuesday. This follows Strong retail data as retailer Walmart also upgraded its profit forecast for the year.
The yield on the 10-year U.S. Treasury note, which resonates with borrowing costs around the world, was unchanged at 1.637 percent.
Asian stock markets were mostly lower, with Tokyo’s Topix losing 0.6% and Hong Kong’s Hang Seng down 0.2%, as a strong dollar weighed on exporters’ earnings prospects. . The dollar index, which measures the US currency against six other currencies, was flat at a 16-month high.
