Markets price in 25bp hike from the BoE
|Sterling to be under pressure over the next week..|
|The PMI data yesterday caused ripples in financial markets, especially with the divergence between the EU & UK readings. The latter is officially about to begin a potentially year-long recession with the former now expected to miss one altogether. This was always on the cards and is the reason why we haven't seen £ fall off a cliff.
It does mean that the recent gains Sterling has made have been lost. Whilst yesterday's data was unexpected, so were the figures the UK had been releasing since the beginning of the year. The Pound finds itself at around 1-week lows now and will remain under pressure until the central bank meetings are over.
Next week is far from a forgone conclusion and so it does pose a risk event to all on February 2nd. 25bp is the consensus now for the BoE after 50bp has been the call all month. If the latter arrives though, we will see £ jump. A 50bp hike from the ECB is practically a certainty and so the mover here will come from the meeting after.