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According to a Reuters poll, 27 out of 56 economists believe the Bank of England will keep interest rates at 3.75% this year; seven economists expect at least one rate cut, and 22 expect at least one rate hike.On May 13th, Matthew Amis of Aberdeen Investments stated in a report that the Bank of England is likely to keep interest rates unchanged at 3.75% in the coming months, thus pushing down short-term UK gilt yields. He noted, "If the Strait of Hormuz reopens in the coming weeks, the Bank of England will not raise interest rates, and the expectation of a rate hike already priced into short-term UK gilt yields will be eliminated, leading to a decline in yields." He added that investors are hoping for a short-term resolution to the Middle East conflict.Polish central bank board member Kotecki: Discussions about raising interest rates in Poland may begin in July.On May 13th, Oxford Economics Chief Economist Daniel Harenberg stated in a report that the inflationary surge triggered by the Iran war is being amplified by a "highly sensitive" business and consumer environment. He pointed out that after years of economic shocks, businesses and households are now reacting more quickly to inflation-related news, thus increasing the risk of a price chain reaction. Harenberg stated, "When markets are highly focused on inflation, businesses react more strongly to inflation news and adjust prices more quickly; households are also more likely to revise their inflation expectations, thus driving stronger demands for wage increases." Oxford Economics predicts that this round of oil supply shocks could push inflation in major economies up by an additional 0.6 to 0.7 percentage points in 2026, meaning that global central banks may need to shift to tighter monetary policy more significantly than the market currently expects.May 13 (Reuters) - Iran is using its control over the Strait of Hormuz and recent tolls levied on transit vessels to make up for a fiscal shortfall as the US blockade severely damages its oil export capabilities. The Iranian military stated that any country wishing to pass through the Strait of Hormuz must do so under Iranian "supervision," but did not specify the methods of supervision. Several shipping brokers revealed that in recent weeks Iran has required transit vessels to obtain prior permits and levied tolls of up to $2 million per vessel. Iranian military spokesman Mohammad Akraminia stated in an interview with Iranian state media Press TV: "This coordinated control not only enhances Irans monitoring and sovereignty over the region, but will also generate revenue for the country equivalent to twice its oil revenue."

The EUR/GBP exchange rate recovers above 0.8000 in advance of Eurozone inflation and UK gross domestic product

Alina Haynes

Mar 30, 2023 16:05

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The EUR/GBP pair extended its recovery above 0.88 during the Asian trading session. Anticipating that the European Central Bank (ECB) will continue to raise interest rates to combat persistent inflation, the cross has depreciated progressively. Friday will see the publication of preliminary Eurozone Harmonized Index of Consumer Prices (HICP) and Gross Domestic Product (GDP) (Q4) figures. Prior to the publication of these figures, it is anticipated that the asset will exhibit explosive activity.

 

It is anticipated that the preliminary Eurozone HICP will decelerate significantly from 8.5% to 7.3%. While it is anticipated that the core HICP will rise to 5.7% from 5.6% in the previous release. Weak energy prices are anticipated to have a significant impact on Eurozone inflation. In light of Christine Lagarde's prediction that inflation will remain elevated for an extended period of time, the European Central Bank (ECB) is expected to continue tightening monetary policy.

 

In the interim, banking tensions are subsiding as the absence of information regarding additional collateral damage has a positive impact on the market. Chief Economist Philip Lane stated on Wednesday that ECB interest rates must rise if banking tension has no or a "relatively limited" impact.

 

Investors avidly anticipate the United Kingdom's Gross Domestic Product (GDP) data. According to the consensus, the United Kingdom's growth in the fourth quarter of CY2022 remained unchanged. It is anticipated that the annual GDP will remain unchanged at 0.4%. It is expected that the British economy will undergo a severe recession as a result of high inflation and sluggish growth.

 

The Bank of England (BoE) policymakers appear confident that inflation will moderate in the near future and that the unexpected rise in February's inflation was a one-time anomaly; however, the absence of evidence raises doubts. If inflation persists, BoE Governor Andrew Bailey stated that additional rate increases would be announced. In contrast, Bank of America (BoA) analysts anticipate that the Bank of England (BoE) will not increase rates and will maintain current levels until 2024.


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