British Pound Remains In Balance Despite Significant Bank of England Rate Hike
The pound remained broadly in balance on Thursday despite the Bank of England’s biggest rate hike since the 1990s. The BoE raised rates for the sixth consecutive meeting, but this time by 50 basis points, bringing them back to their highest level since 2009 in the face of runaway inflation, but the effect was not felt by the pound, which was penalized by the bank’s new forecast predicting a five-quarter recession from the fourth quarter of the year.
The British economy should therefore experience a long episode of stagflation, since at the same time “inflation should remain very high in 2023”, according to the central bank. Bad news for the pound sterling, but also for the risky assets most dependent on the British economy. In this context, UK large caps, which are more international, are more likely to outperform small and mid caps than the reverse.
Attention is now focused on the monthly US employment report published this afternoon in an equally uncertain economic context across the Atlantic. The consensus expects 250,000 new jobs in July, after 372,000 in June, and a 0.3% increase in the average hourly wage.
GBP/USD daily price chart – key levels