Bank of England raises interest rate by 0.75%
Daily Currency Update
Yesterday afternoon, Governor Bailey and the BoE announced a further 75 basis point hike, which met market expectations and was its most aggressive increase to combat inflation since 1989. The BoE said it expects a recession to last for all of 2023 and the first half of 2024 which added to the pound's decline against the US dollar. The pound fell sharply as traders digested Bailey’s words, with GBP losing over two cents against the US dollar.The BoE now expects inflation to hit a 40-year high of around 11% during the current quarter, more than five times its 2% target. But it also thinks the economy has entered a recession that could mean it contracts in both 2023 and 2024 and shrinks by 2.9% over the two years.
Key Movers
The US dollar gained against major currencies on Thursday after Federal Reserve Chair Jerome Powell signalled US interest rates will likely peak at a higher level than markets expected. The futures markets on Thursday have priced in US interest rates to peak at 5.15% at the June meeting in 2023, which was up from about 4.9% initially expected in May.Expected Ranges
- GBP/USD: 1.1155 - 1.1255 ▼
- GBP/EUR: 1.1455 - 1.1545 ▲
- EUR/USD: 0.9705 - 0.9805 ▼