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Markets react as potential votes for a November hike now in play

BOE
  • As we noted in previous comments, the key part of the statement is: "Any future initial tightening of monetary policy should be implemented by an increase in Bank Rate, even if that tightening became appropriate before the end of the existing UK government bond asset purchase programme."
  • Why would the Bank make the latter part of this statement if there was no chance of anyone voting for a hike at the November meeting?
  • Short sterling: Dec21 futures down 3 ticks, Mar22 down 4 ticks to 99.62 (more than fully pricing a hike to 0.25%), Jun22 down 4.5 ticks to 99.49 (i.e. around full pricing for a hike to 0.50%).
  • Gilt futures move to the days lows around 127.11 but recover a little to 127.17. UK 5s30s move to its flattest level in 15 months (approaching 60bp).
  • EURGBP down sharply and trading back below the 50-day EMA. A deeper sell-off would open the key short-term support at 0.8501, Sep 16 low. Initial support is at 0.8530, Sep 20 low.
  • GBPUSD is up around 80 pips around 1.3700 at the time of writing, the move higher opens resistance at 1.3759, the 20-day EMA.
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