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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
UK
- We noted last week that the correlation between 2-year ahead rate expectations is more important for the pound than when the first rate hike will be.
- Over the past week risk sentiment has deteriorated in the market with the Taliban takeover of Afghanistan, renewed focus on Covid-19 (particularly due to the lockdowns in New Zealand which have led the RBNZ to delay hiking) and some relatively weak Chinese economic data.
- While little has changed in terms of expectations for ECB rates over the next couple of years (still expected to remain at current levels), money markets have reduced expectations of where UK rates will be.
- As the table below shows, short sterling futures have moved up around 5bp at the two year horizon. This has corresponded to a rise in EURGBP, with the correlation with 2-year rate expectations remaining strong (see chart). We see no reason for this relationship to break down and hence think it is the biggest factor to watch while trading the pound at present.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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