Sterling rallied broadly today, driven by BoE’s Monthly Decision Maker Panel survey, which underscored a complex economic outlook that reinforces the central bank’s cautious approach to policy easing. The survey revealed a mixed picture of inflationary and deflationary pressures. Notably, 54% of businesses anticipate raising prices in response to National Insurance contribution hikes outlined in the new government’s first budget. However, an equal proportion also expects to reduce staffing levels, signaling growing concerns about employment. Additionally, 38% of firms indicated plans to pay lower wages than previously intended, contributing to a deceleration in expected pay growth to 3.8% from 4.1%. Meanwhile, inflation expectations among businesses ticked higher, with consumer price inflation projected at 2.7% for the year ahead, up from 2.6% in October. For November alone, inflation expectations jumped to 2.8% from 2.5%, suggesting persistent cost pressures despite softening wage growth. These mixed signals present a challenging picture for BoE as it deliberates its next steps. Overall for the day, though, Euro led gains among major currencies, as markets digest the latest developments in France’s political sphere. Prime Minister Michel Barnier has resigned following a no-confidence vote against his government, with President Emmanuel Macron expected to address the nation later today. Sterling ranks as the second strongest currency of the day, followed by the Swiss Franc, marking a rebound for European currencies after recent underperformance. On the other hand, Yen is underperforming, followed by the Dollar. Commodity-linked currencies, including Aussie, Kiwi and Loonie, are positioning in the middle. .... |
