Sterling at the highest point against the euro since February 2020

Sterling reached its peak against the euro since February 2020 on Wednesday after a rise in inflation in the UK reached its highest level in almost a decade last month.

The pound rose 0.5 percent against the euro to more than € 1.19, compared to its best week against the average currency since January 2021, while markets expect a sharp rise in December and the Bank of England as expected to move similarly to the European Central Bank remained low.

The UK’s annual consumer price index rose to 4.2 per cent in October, which showed on Wednesday, more than double what the central bank had demanded and financial experts. expectations and 3.9 percent.

“There is a very good chance that interest rates will reach 0.75 percent next year” from a record low of 0.1 percent, said Dean Turner, a UK economist at UBS financial management.

Traders expect the BoE to become the first major bank to raise interest rates after global investors put them down in early 2020, according to Refinitiv data from interest rates.

On Tuesday, BoE governor Andrew Bailey told a House of Commons committee that he was “not too concerned” about rising prices in the UK, which has been the case. driven by rising prices for household appliances, used cars and fuel.

The UK currency rose sharply against the dollar for a week, buying about $ 1.34.

The dollar index, which measures US currencies against six others, has been close to 16 months, encouraged by betting that the US central bank would raise interest rates from a slowdown next summer. The decline in consumer prices in the US reached a 30-year peak of 6.2 percent year-on-year until October, when retail sales also peaked. high expectations.

The euro is about to weaken against the dollar since July 2020, about $ 1.13. JPMorgan’s inflation index has declined sharply since September 2020, raising concerns about the rising cost of developing countries that borrow money and buy goods with dollars.

The Turkish lira fell 2.7 percent on Wednesday to a record low of 10.6 per dollar. The South African rand is around 15.5 per dollar – the weakest since March. The Mexican peso has weakened, though the country’s largest bank has raised interest rates on its last four meetings.

When Turkey’s central bank is reduced interest rates, planters in Brazil, Russia, Chile and Colombia among others seem to be able to increase them.

“They can do this because of economic growth, which makes their markets less attractive,” said Tim Graf, chief of macro strategy at State Street.

In the stock market, Wall Street’s S&P 500 fell 0.1 percent, close to a constant rise, following a better period than companies think across the Atlantic, indicating that companies are surpassing higher consumer prices.

Nasdaq Composite technical firm also fell 0.1 percent while Stoxx Europe 600 increased 0.2 percent, following its recent closing record.

Other market trends:

  • Yields over the 10-year US Treasury note, which sets the tone of global borrowing rates, were down 1.632 percent.

  • European natural gas contractors coming in December rose 6.1 percent to € 99.8 per megawatt hour due to lack of food, as Russia also did in the past to increase exports.

  • Asian markets fell sharply, with Tokyo’s Topix losing 0.6% and Hong Kong’s Hang Seng falling 0.2%.

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