Treasury Market Commentary –
Markets: BoE base rate expected to be 4.25% by 2025
A weekly economic update from our Treasury team.
Macro Commentary
The Bank of England kept policy on hold with a 6-2-1 split vote, and revised their forecasts for growth marginally higher, but said inflation risks remain to the upside.
The market is now forecasting the Bank will make an initial rate cut in June and drop rates to around 4.25% by year-end. This of course will be data-dependent, with underlying inflationary pressures still evident and the jobs market still relatively robust. The Bank estimates a third of tightening to date has yet to impact the economy, whilst the budget in March only adds to the uncertainty.
The US central bank also held policy steady and pushed back on market expectations of an initial rate cut in March, as the economy remains fundamentally strong. The market is still forecasting up to 1.40% of cumulative cuts this year.
In Europe meanwhile, the authorities are also expected to be more aggressive than the UK, and begin cutting earlier, with inflation dropping significantly and the growth outlook looking particularly challenging. Up to 1.45% of rate cuts are currently being priced in for the year.
Rising geopolitical tensions continue to drive market sentiment on increasing fears of a wider escalation of the conflict.
On the exchanges, a rather muted reaction to the central bank meetings, with Euro weakness an ongoing theme, keeping GBP/EUR near its recent highs above the 1.1700 level.
GBP/USD – 1-year chart
Week Ahead
Date |
Release |
Last |
Expected* |
---|---|---|---|
5/2/24 |
UK New Car Registrations YoY |
9.8% |
n/a |
5/2/24 |
UK S&P Services PMI |
53.8 |
n/a |
5/2/24 |
UK S&P Composite PMI |
52.5 |
n/a |
*Bloomberg survey / Not available
Foreign Exchange
Currency |
Last |
Currency |
Last |
---|---|---|---|
GBP/USD |
1.2755 |
USD/JPY |
146.55 |
GBP/EUR |
1.1725 |
AUD/USD |
0.6595 |
EUR/USD |
1.0880 |
USD/CHF |
0.8575 |
GBP/AED |
4.6850 |
XAU/USD |
2055 |
Equity Indices
Indices |
Previous Close |
YTD % Change |
---|---|---|
FTSE 100 |
7622 |
-1.44% |
S&P |
4906 |
+2.86% |
EUROSTOXX |
4638 |
+2.59% |
Central Bank Key Deposit Rates
BOE |
FED |
ECB |
---|---|---|
5.25% |
5.25% |
4.00% |
UK Benchmark Rates
Swap Mid (SONIA) |
|
---|---|
2-year |
+4.24% |
5-year |
+3.64% |
View Arbuthnot Latham’s Private and Commercial deposit rates.
This document should be considered a marketing communication for the purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. The information given in this document is for information purposes only and is not a solicitation, or an offer to buy or sell any security or any other investment or banking product. It does not constitute investment, legal, accounting or tax advice, or a representation that any investment or service is suitable or appropriate to your individual circumstances.
You should seek professional advice before making any investment decision. The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money invested. Past performance is not a reliable indicator of future results. Investment returns may increase or decrease as a result of currency fluctuations.
The facts and opinions expressed are those of the author of the document, as of the date of writing and are liable to change without notice. We do not make any representations as to the accuracy or completeness of the material and do not accept liability for any loss arising from the use hereof. We are under no obligation to ensure that updates to the document are brought to the attention of any recipient of this material. Please note that this commentary may not be reproduced, distributed, disseminated, broadcasted, sold, published or circulated without prior consent from Arbuthnot Latham & Co., Limited. Arbuthnot Latham & Co., Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Weekly
Treasury Market Commentary
Would you like to receive Arbuthnot Latham’s weekly Treasury Market Commentary directly to your email inbox? Click the button to subscribe to our email newsletters.