Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Pound Tumbles as Rate-Hike Bets Cut on Renewed Recession Fears

Forex May 24, 2022 07:00AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Pound Tumbles as Rate-Hike Bets Cut on Renewed Recession Fears

(Bloomberg) -- The pound tumbled and investors rushed to the safety of government bonds after an index of UK private sector growth unexpectedly slid in May to reawaken fears of a recession.

That led traders to rein in bets on further interest-rate hikes from the Bank of England, given the risk that higher borrowing costs will halt growth. The pound fell nearly 1% against the dollar, reversing Monday’s gains and making it the most volatile Group-of-10 currency this week.

Traders piled into short-dated government debt, driving down the two-year gilt yield by 12 basis points to 1.45%, its biggest drop in two weeks. Bonds are benefiting as money markets expect about 15 basis points fewer rate increases this year, a day after BOE Governor Andrew Bailey said a cost-of-living crisis will be factored into policy decisions.

“After Governor Bailey’s not-so-hawkish comments yesterday, today’s PMI figures underscore the real income shock on the UK economy,” said Geoffrey Yu, a senior foreign-exchange strategist at Bank of New York Mellon. “If we had to pick one G-10 central bank most likely to pause soon, it would likely be the BOE.”

Read more: UK Faces Risk of Recession as Firms Wilt Under Soaring Costs

S&P Global’s index of private sector growth unexpectedly slumped in May to levels last seen in February 2021, when coronavirus lockdowns were still in place, the firm said Tuesday. The speed of the slowdown was the fourth-largest on record and worse than anything seen before the pandemic hit. 

“These are stunning decreases over such a short period of time,” said Christopher Dembik, head of macro analysis at Saxo Bank, adding that inflation is still “out of control” and a technical recession is likely in the UK this year.

The data gives policy makers bandwidth for just one more 25 basis-point hike at June’s meeting at a maximum, according to Simon Harvey, head of currency analysis at Monex Europe. The BOE has already implemented four back-to-back hikes to deal with surging inflation. 

©2022 Bloomberg L.P.

 

Pound Tumbles as Rate-Hike Bets Cut on Renewed Recession Fears
 

Related Articles

EU agrees rulebook for 'Wild West' crypto markets
EU agrees rulebook for 'Wild West' crypto markets By Reuters - Jul 01, 2022

By Huw Jones and Tom Wilson LONDON (Reuters) - The European Union on Thursday reached a provisional deal on the world's first set of comprehensive rules to regulate what one...

Dollar Edges Higher, Lifted by Safe Haven Demand
Dollar Edges Higher, Lifted by Safe Haven Demand By Investing.com - Jul 01, 2022 4

By Peter Nurse Investing.com - The U.S. dollar edged higher in early European trade Friday, trading close to the highs of the year on safe-haven demand as central banks take on...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email