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GBINTR trade ideas

$GBINTR -U.K Interest RatesECONOMICS:GBINTR (December/2024) source: Bank of England The Bank of England left the benchmark bank rate steady at 4.75% during its December 2024 meeting, in line with market expectations, as CPI inflation, wage growth and some indicators of inflation expectations had risen, adding to the risk of inflation persistence. The central bank reinforced that a gradual approach to removing monetary policy restraint remains appropriate and that monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further. The central bank will continue to decide the appropriate degree of monetary policy restrictiveness at each meeting.
ECONOMICS:GBINTR
by Mr_J__fx
$GBINTRS - BoE's Snowball - The Bank of England (BOE) decided to deliver its #inflation medicine in a bigger dose at their recent monetary policy committee meeting. The bank made the shock decision to raise borrowing costs a half percentage point, taking the official rate to 5% ; double the size of the increase anticipated by most economists. BoE hiking interest rates to 5% , it adds further strain to millions of homeowners across the country. The Central Bank Rates was upped by 0.5% from 4.5% previously and remains at it's Highest Level since 2008 Financial Crisis.
ECONOMICS:GBINTR
by Mr_J__fx
Also estimating GB IR going down :)Esteemed colleagues and discerning investors, As we gather to deliberate on the trajectory of our financial endeavors, let us turn our attention to the chart that unfolds before us. This graph is not merely a collection of lines and oscillations—it is the pulse of the market, the heartbeat of commerce, the very rhythm of our economic aspirations. Observe the vibrant fluctuations, the ebb and flow of value that defies the flat line of stagnation. Here we see a recent descent, a modest humbling from previous heights, which speaks to the cautious prudence that underlies our most strategic decisions. The red and green arrows, much like the hands of a compass, point to a divergence in paths, a moment of decision. The red arrow, descending sharply, may initially stir a flutter of concern, a hint of the bearish sentiment that tempers exuberance with sobriety. Yet, juxtaposed with this is the green arrow, ascending with the promise of recovery, a bullish rejoinder that whispers of resilience and potential. In this oscillation, encapsulated by the serene waves of the indicator below, we find the true test of our mettle. It is a siren call to the savvy, to those who can read between the peaks and troughs and discern the opportune moment to act. This prediction, cast upon the waters of future markets, is a vessel laden with our collective wisdom. It charts a course that acknowledges the inevitable storms and celebrates the prevailing winds that propel us forward. Let us then approach this forecast with the gravity it deserves, yet also with the optimism that has long been the hallmark of our shared ventures. For it is not just a potential decline that we prepare for, but also the ascent, the rally, the triumphant climb from the valley to the mountaintop. In closing, may this chart serve as a beacon, guiding our investments with the twin lights of caution and opportunity. May our decisions be crafted with the precision of the master artist, turning the canvas of unpredictability into a masterpiece of profit and progress. Thank you.
ECONOMICS:GBINTRShort
by UhXeL
Virulent inflation raises pressure on the Bank of EnglandThe inflation battle is far from over in the UK. In fact, the nature of inflation is taking a new form as the root cause moves away from external to more domestically driven shocks. While the headline rate remained unchanged at 8.7%yoy in May, core inflation accelerated to 7.1% in May from 6.8% in April, marking the highest rate since March of 19922. In response the Bank of England (BOE) raised interest rates by a bumper 50Bps to a 15-year high. While the Federal Reserve (Fed) and the European Central Bank (ECB) have made progress on bringing down inflation, the BOE still has some ways to go. Current market pricing assumes the terminal policy rate will go to 6% by year end3. UK inflation proving to be virulent The UK has the most severe entrenched inflation problem across developed markets. The domestically driven increase of services prices advanced from 6.9% to 7.4%yoy in May4. As services are labour intensive, they are being impacted by strong wage gains. Employment growth has been stronger than projected underscoring continued robust demand for labour. This high demand caused the rise in weekly average earnings (ex-bonus) to 7.5% in April5, well above the BOE’s forecast. Brexit has been partly responsible for the rise in wages. Brexit reduced the mobility of European workers. The resulting lack of non-qualified workers has not yet been reabsorbed. The situation was clearly exacerbated during the Covid pandemic that left a large part of the workforce sick. The shortage of workers in the UK continues to weigh on the supply side and has been the key reason inflation has remained stubbornly high. The resilient gains in employment (up 1.2% in April 20236) have allowed UK households to continue spending on services. Thereby contributing to higher services inflation, prices for recreational and cultural goods and services rose by 6.8%yoy in May 20237. At the same time, due to the shift away from floating rate mortgages towards fixed rate products over the last decade, the pass through of higher rates is taking longer to feed through the economy, thereby enabling the consumer to appear more resilient. However, headwinds are appearing from higher mortgage rates, with at least 800,000 fixed mortgages due to move on to significantly higher rates in H2 20238. Rents have also been rising, at an annualised pace of 5.6% in May compared to 3.2% in 20229. This is likely to place further pressure on real disposable incomes and simultaneously fuel core inflation higher. The Institute for Fiscal Studies estimates that higher interest rates will cause the average mortgage holder to suffer an 8.3% fall in disposable income compared to a scenario where rates remained at March 2022 levels. For 1.4 million of those borrowers, disposable income will fall by more than 20%10. BOE guided dovish The BOE’s guidance implied that no further rate hikes should be needed bar evidence of more persistent inflationary pressures however the market ignored this. Money markets priced a terminal rate of 6.25% by February 202411. The BoE did not rule out further rate increases should the inflation data continue to be unfavourable. However, they did downplay the unexpected surge in core inflation in May owing to special contributing factors such as the sharp rise in vehicle excise duty and the erratic contribution of airfares and holiday packages. The BOE also highlighted that forward looking indicators are pointing to material falls in future wage inflation which could then lower the pressure on services prices. We share that view, as producer price inflation which tends to serve as a leading indicator for consumer price inflation, eased more than expected in May. The June composite Purchasing Managers Indices (PMI) dropped for a second month in June, showing price pressures easing across the board, suggesting the economy could be turning. Sterling Positive rate surprises are not always positive for the currency. The Pounds muted response (-0.17%)12 to the BOE meeting despite the hawkish surprise and its negative reaction (-0.21%)13 to the hawkish May inflation data suggest that the BOE is prepared to endure a deeper slowdown in order to bring inflation under control. As a growth sensitive currency this is likely to remain an important headwind for the Pound. Sources 1 Bloomberg as of 23 June 2023 2 Bank of England as of 22 June 2023 3 Bloomberg, as of 23 June 2023 4 Bank of England as of 21 June 2023 5 Office for National Statistics as of 31 May 2023 6 Office for National Statistics as of 31 May 2023 7 Bank of England as of 22 June 2023 8 Source: Bank of England, Bloomberg as of 22 June 2023 9 Office for National Statistics, as of 22 June 2023 10 Institute for Fiscal Studies as of 30 April 2023 11 Bloomberg as of 23 June 2023 12 Bloomberg GBP/USD as on 22 June 2023 13 Bloomberg GBP/USD as on 20 June 2023
ECONOMICS:GBINTR
by aneekaguptaWTE