Early Morning Call: BoE to follow Fed and raise rates?

Fed rate hike

As expected, the US Federal Reserve (Fed) raised its rates by 25-basis points (bp) to a new target range of between 4.75% and 5%, the highest level since 2007.

The US dollar fell to a seven-week low as the US central bank sent the signal that it is nearly done with the most aggressive streak of rate rises in decades. Members of its policy-setting committee removed the oft-repeated warning that "ongoing increases" would be necessary. Instead, the committee said "some additional policy firming may be appropriate" to bring inflation back to the bank's 2% target.

Wall Street and the Nasdaq ended the session around 1.6% lower, while gold regained most of the ground it lost earlier in the week.

BoE

The Bank of England (BoE) meanwhile makes its decision on rates at 12pm today, but the picture has been complicated by Wednesday's unexpectedly strong inflation print. Markets now appear to be pricing in a quarter-point rise, a response to headline consumer prices rising at their fastest rate in 45 years.

One factor that will weigh in favour of rates staying the same is that some of the inflation was due to one-off factors such as the weather-related shortages of fresh fruit and vegetables. This led to empty shelves in UK supermarkets and helped drive up prices of food and non-alcoholic drinks at their fastest pace in more than a generation.

Also today, the market awaits US initial jobless claims and eurozone’s consumer confidence flash for the month of March.

Equities

Elsewhere on the equity market, Wickes reported a 11.3% fall in pretax profit and said trading in the first 11 weeks of 2023 was in line with expectations.

In the US, Accenture and General Mills are due to report quarterly earnings.

Coinbase, an all-session stock on the IG platform, fell more than 22% after it was issued a Wells notice by the Securities and Exchange Commission (SEC). A Wells notice is often one of the final steps before the SEC formally issues charges, generally laying out the framework of what happens next.

CNBC says that "based on discussions with the staff, the potential enforcement actions would relate to aspects of the company's spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet".

Commodities

On the commodity market, oil prices fell slightly after the Fed comments, but WTI and Brent remained above $70 and $75 respectively.

Prior to the Fed decision, oil prices rose as US crude oil stockpiles rose unexpectedly last week to their highest in nearly two years, according to the EIA. Crude inventories rose by 1.1 million barrels last week, their highest since May 2021. Expectations were for a 1.6-million-barrel drop.

Gasoline stocks fell by 6.4 million barrels, and distillate stockpiles fell by 3.3 million barrels.