Midday yesterday brought to an end months of speculation with the Monetary Policy Committee at the Bank of England, as the members voted to increase interest rates within the UK for the first time since mid-July 2018. The interest rate was boosted by 0.15% to sit at 0.25%, the same rate as the emergency cut at the start of the Covid-19 pandemic in Europe and the UK in March 2020. GBPEUR rose by near 0.7% in a matter of minutes with near all GBP pairs following suit.
However, the euphoria was short lived, with sterling selling sharply and currently sits in a similar position to the pre-announcement rate. Omicron variant concerns are still present with the virus spreading, inflation is predicted to peak at 6% early in 2022 and the ECB also had their own interest rate decision to announce.
Although the European Central Bank opted against raising interest rates, the following press conference brought about a more hawkish than expected outlook for the continent. The central bank announced a reduction in the Pandemic Emergency Purchase Programme in Q1 2022, with a view to ending the programme entirely by March. This created more demand for the single currency as the announcement brought forward analysts’ expectations of an interest rate rise within the Eurozone and essentially leaves the pound back at square one.
Have a great day.
Author: Jack Nicholls, Senior Relationship Manager.
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