Sterling jumps, UK bonds fall on inflation shock
The pound jumped vs the dollar and UK government bonds slipped after British inflation unexpectedly rose to 10.4% in February, prompting rate hike fears. Brace for more volatility when the Bank of England meets this Thursday.
Sterling jumps
Sterling is rising vs the dollar after those shock inflation numbers out of the UK, taking it to a 2% rise against the greenback in the month of March so far. Let's take a look at the chart here for you. As you can see there, there's this clear move on the green candle here. This is the daily chart. These moves come after UK price pressures heated up more than thought in February. People who went to restaurants and pubs paid more for their meals and prices rose at the fastest rate since 1977. What's more, underlying inflation is up as well. So, the price of things like cigarettes, energy, your weekly shop, all that is up sending the CPI rate to 10.4% when economists had expected it to fall to 9.9%. So, where is this salad dressing?
Tough position
All this puts the Bank of England in a really tough position as the rise in inflation means that it can't press that 'pause' button on a rate hike this Thursday. Of course, with the meltdown in the banking crisis, many economists and market watchers have thought this might give the bank ammunition to do so. UK bonds are falling.
11th hike?
Traders are now firming up bets on a quarter-point hike. If this happens, this will be the 11th time the Bank of England has raised interest rates in a row.
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