Headlines:
- BOE raises bank rate by 50 bps to 4.00%, as expected
- BOE's Bailey: We are seeing first signs that inflation has turned the corner
- Sterling stays under pressure after BOE decision
- US January Challenger layoffs 102.94k vs 43.65k prior
- Germany December trade balance €10.0 billion vs €9.2 billion expected
- BOJ's Wakatabe: Outcome of annual wage negotiation not enough to change BOJ policy view
Markets:
- JPY leads, GBP lags on the day
- European equities higher; S&P 500 futures up 0.5%
- US 10-year yields down 1.1 bps to 3.387%
- Gold up 0.2% to $1,953.66
- WTI crude down 0.5% to $76.01
- Bitcoin up 0.5% to $23,796
The central bank bonanza continues today with the BOE delivering a dovish 50 bps rate hike, which has sent the pound tumbling. The currency was already subdued ahead of the decision and the central bank hinting that rates are approaching a peak and that "inflation has turned the corner" was enough to keep the pressure on.
There was a bit of a whipsaw initially on the rate decision itself with cable bouncing between 1.2320 and 1.2390, all before traders digested things and we see price fall to a low of 1.2265 as Bailey delivers remarks in his press conference. EUR/GBP is also seeing a firm break now above 0.8900, pushing to a high of 0.8955 as buyers target the 0.9000 mark.
Other major currencies were not too enthusiastic with the euro trading in and around 1.1000 with the dollar more or less steady. USD/JPY did slip though from 129.00 to 128.40 now as bond yields also drop amid the more dovish central bank decisions from both the Fed yesterday and the BOE today.
Risk trades remain optimistic with US futures sitting higher and European indices also posting modest gains on the session. That said, the ECB is up next and could spoil the party as they are the most hawkish among the major central banks right now.
