{"id":621,"date":"2023-04-20T19:06:53","date_gmt":"2023-04-20T18:06:53","guid":{"rendered":"https:\/\/hcfx.sofyma.com\/?p=621"},"modified":"2023-05-25T16:53:51","modified_gmt":"2023-05-25T15:53:51","slug":"markets-weigh-on-further-tightening-from-boe","status":"publish","type":"post","link":"https:\/\/hamiltoncourtfx.com\/it\/markets-weigh-on-further-tightening-from-boe\/","title":{"rendered":"Markets Weigh on Further Tightening from BoE"},"content":{"rendered":"
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Money markets are now implying that a 25bps rate hike is fully priced in on 11th May, as well as a further 25bps hike at the next one on 22nd June also being pretty well priced in. Markets are also weighing on a further 0.25% hike thereafter at the next meeting. With the current base rate at 4.25%, a further 75bps would bring the base rate to 5%, bringing borrowing rates to fresh 2008 highs. Yesterday\u2019s inflation figures has further raised questions over the Bank of England\u2019s monetary policy, as it remains 5 times above Threadneedle Street\u2019s target and is evidently the antithesis to \u2018transitory\u2019.<\/p>\n <\/div>\n

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For example, Ben Marlow from the Telegraph has written that UK inflation \u201creally stands out, and that makes a fool of Bailey, as well as a mockery of the Treasury\u2019s pollyanna version of events, is that Britain has the highest rate of inflation of any large, advanced economy, and by some distance compared to many of its European neighbours.\u201d Against the UK\u2019s peers (Spain at 3.1%, Netherlands at 4.5% and Belgium at 4.9%), Britain\u2019s persistently elevated inflation continues to stand out. Hence, while the BoE\u2019s MPC continue to worry that on overly restrictive monetary policy will be damaging for Britain\u2019s fragile growth, the remains that the country\u2019s inflation rate remains well above target.<\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n

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Today, investors will be chiefly focused on US initial jobless claims where the market is forecasting a print of 240,000 \u2013 marginally higher than the last print of 239,000. Elsewhere, at 13:00 we will see President Lagarde deliver a speech where markets will be looking to gain any insight into her plans on the forthcoming ECB rate decision on 4th May following her weekend comments which stated that central bank policy makers and politicians have a \u2018narrow path\u2019 to tread between inflation, growth, and stability in the banking sector. The Bank of Canada\u2019s Governor Macklem will also be speaking this afternoon at 16:30 and markets will be looking for further insight into Ottowa\u2019s monetary policy in light of them recently halting their rate hike cycle. In early March, the Bank of Canada met market expectations by leaving rates unchanged at 4.5%. This marked the first major central bank in the West to cease further monetary tightening, as Ottawa cited inflation falling in line with expectation as a key influence behind the decision, though it still remains well above their target rate. Given concerns over growth and Canada\u2019s house price inflation, the central bank have been concerned about an overly restrictive monetary policy given its implication on mortgages and economic activity.<\/p>\n<\/div>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n\n

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Oil Slips As Markets Consider Central Bank Tightening<\/h2>\n <\/div>\n
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In light of investors weighing on the prospect of further monetary tightening from central banks (including the Fed, BoE and ECB), oil prices have come under pressure, slipping to around $78.5dpb. This marks a decline from recent highs seen on 12th April where WTI crude futures edged towards $84dpb. This appreciation seen over early April was chiefly driven by OPEC+\u2019s announcement that they would look to reduce output by some 1.16 million barrels per day from May until the end of 2023. As such, WTI crude futures are now trading 1% down on the day, while 12% up on the month and 23% down on the year.<\/p>\n

More generally, markets are also considering OPEC\u2019s Secretary-General Haitham Al-Ghais recent warning over the potential for suppressed demand from Europe and the US. Though, according to the International Energy Agency, global oil demand could rise by 2m bpd to reach a record level of just shy of 101.7m bpd. According to the IEA, half of the expected rise in demand will be driven by China\u2019s reopening. Over the course of last year, Chinese oil demand dropped on average by 390,000 bpd, which also represented the first annual decline since 1990.<\/p>\n

Away from the demand side, the IEA also highlighted potential oil supply side constraint. The group stated that:\u00a0\u201cWorld oil supply growth in 2023 is set to slow to 1 mb\/d following last year\u2019s OPEC+ led growth of 4.7 mb\/d. An overall non-OPEC+ rise of 1.9 mb\/d will be tempered by an OPEC+ drop of 870 kb\/d due to expected declines in Russia. The US ranks as the world\u2019s leading source of supply growth and, along with Canada, Brazil and Guyana, hits an annual production record for a second straight year.\u201d<\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"

As markets digested UK CPI coming in hotter-than-expected and remaining in double digits, investors upwardly revised their rate hike expectations from the Bank of England.<\/p>","protected":false},"author":15,"featured_media":1086,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"rp-language":[16],"class_list":["post-621","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-morning-updates","rp-language-en_gb"],"_links":{"self":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts\/621","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/comments?post=621"}],"version-history":[{"count":2,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts\/621\/revisions"}],"predecessor-version":[{"id":623,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/posts\/621\/revisions\/623"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/media\/1086"}],"wp:attachment":[{"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/media?parent=621"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/categories?post=621"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/tags?post=621"},{"taxonomy":"rp-language","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/it\/wp-json\/wp\/v2\/rp-language?post=621"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}