Uncle Banerjee looks ahead to European and global markets
The stage is set for the Bank of England in a busy day for central banks in Europe and a rate hike is almost certain but the only question is whether the Bank of England will raise rates by 25 basis points or by 50 basis points and go completely hawkish Will it turn over? .
Markets are pricing in a nearly 50% chance that the Bank of England will choose to raise rates by 0.5 percentage points after Wednesday’s report of higher-than-expected inflation. Economists polled by Reuters last week had unanimously expected the Bank of England to raise interest rates by 25 basis points to 4.75%, the highest since 2008.
Policy divergences between the Bank of England and other major central banks will boost the pound as a result of blistering inflation in the UK and inflation elsewhere in the world that is easing but not fast enough It has become. The pound has eased in Asian time but is not far from its 14-month high last week.
Trading in Asian markets was somewhat subdued as China and Hong Kong were closed for the holidays, and while the MSCI Asia ex-Japan index struggled with direction, the yen strengthened against the dollar, hovering around the ¥141 level. .
In the futures market, European stocks could open lower as traders consider remarks consistent with Fed Chairman Jerome Powell’s recent hawkish tone. .
Powell warned that a majority of policymakers saw two more half-point rate hikes likely by the end of the year, but said the Fed’s decision last week to keep rates unchanged would be put on hold. ” has not yet been positioned.
“I never used the word pause, and I don’t want to use it here,” Powell said.
While his remarks did not come as a surprise, the market remains unconvinced that the Fed will raise rates two more times. According to the CME FedWatch tool, the market has priced in a 72% chance of a 25bps rate hike next month, with no more hikes after that.
Elsewhere, Turkey’s central bank, under new governor Hafizeh Gay Ercan, has sharply raised its policy rate and changed policy as the country takes steps toward economic legitimacy to combat high inflation. is expected to confirm.
The Swiss National Bank and Norway’s Norgesbank are also due to announce policy decisions, with both central banks widely expected to raise interest rates by 25 basis points.
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Key developments that could affect the market on Thursday:
Economic Events: Rate Decisions by BOE, Turkey’s Central Bank, Swiss National Bank, Norway’s Norges Bank
Reported by Ankur Banerjee from Singapore.Edited by Murarikmar Anantaraman
Our criteria: Thomson Reuters Trust Principles.
