Headlines:
- Sterling tumbles as BOE paints dire outlook on UK economy
- BOE raises bank rate by 25 bps from 0.75% to 1.00%, as expected
- BOE's Bailey: Risks to inflation are skewed to the upside
- OPEC+ reportedly agrees to stick with existing oil output policy
- OPEC+ JMMC reportedly recommends sticking to existing oil output policy
- ECB's Lane: Unlikely to revert back to pre-pandemic inflation trend
- ECB's Lane: Exact timing of rate hike is not the most important issue
- ECB's Panetta: It would be incautious to act on rates before seeing Q2 data
- UK April final services PMI 58.9 vs 58.3 prelim
- Germany March factory orders -4.7% vs -1.1% m/m expected
- US April Challenger layoffs 24.29k vs 21.39k prior
- Switzerland April CPI +2.5% vs +2.5% y/y expected
Markets:
- USD leads, GBP lags on the day
- European equities higher; S&P 500 futures down 0.6%
- US 10-year yields up 2.9 bps to 2.944%
- Gold up 0.9% to $1,897.50
- WTI up 0.8% to $107.10
- bitcoin down 0.9% to $39,461
The post-FOMC moves yesterday are retracing back slightly as the dollar firmed, bond yields crept higher and US futures are marked lower in European morning trade. But the pound is the big mover as it crumbled amid a dovish rate hike by the BOE, with the central bank painting a rather bleak picture of the UK economy moving forward.
Stagflation risks are what stands out as policymakers predict 10% inflation this year with the economy contracting at the end of the year and grinding to a halt in the early stages of next year.
That is enough to drag the pound to fresh lows since July 2020 as cable tumbled from 1.2540 to below 1.2400 currently.
Meanwhile, there is still some debate to the peak hawkishness message from the Fed yesterday as markets scaled back on the post-FOMC moves. EUR/USD moved down from 1.0600 to 1.0550 while USD/JPY jumped up from 129.30 to near 130.00 again currently.
AUD/USD also gave up gains from around 0.7240 in a fall to 0.7190 at the moment.
This comes as bond yields are staying higher with 10-year Treasury yields still lingering just below the key 3% mark.
Elsewhere, stocks are also looking more guarded with US futures holding lower once again as yesterday's late spark may yet prove to be fleeting.
