Good morning,

The Bank of England yesterday decided to hike interest rates a further 0.25%, taking the rate to 0.75%. Throughout the morning, sterling appreciated in the lead up to the decision, but quickly fell 0.5% against the euro and USD. EUR/USD is fighting the 1.1100 barrier; it tipped over the mark on a few occasions yesterday but was unable to hold its ground and moved back below due to the lack of developments in the Russia-Ukraine peace talks.

Generally, a currency will appreciate when its central bank raises interest rates as the currency becomes more attractive to foreign investors, but in yesterdays case, we saw GBP drop off after the hike. This was due to sentiment around the hike, along with the fact that one member of the Monetary Policy Committee voted against the hike. The bank agreed that further hikes are needed to curb inflation, but said that the markets expectations for the interest rate to be at 2% by December were ‘extreme’.

Today is very light on the data front so focus will turn to the headlines from the Russia-Ukraine conflict as well as a call between China’s president Xi Jinping and America’s Biden.

Have a great weekend.

Thomas Read, Senior Relationship Manager.

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