Shares firm, pound slips after BoE decision tees up August cut
Published: 01:06 PM,Jun 20,2024 | EDITED : 05:06 PM,Jun 20,2024
A financial trader works at their desk at CMC Markets in the City of London __Reuters
LONDON: Global shares approached record highs on Thursday, buoyed by expectations of US interest rate cuts this year. Meanwhile, the pound softened following the Bank of England's decision to keep rates unchanged in a dovish move.
In a busy day for European central banks, the BoE maintained UK rates at a 16-year high of 5.25 per cent. However, it signaled a finely balanced decision, hinting that an August rate cut could be in play.
The Swiss National Bank cut interest rates for the second time this year, pressuring the Swiss franc, while Norway's Norges Bank held rates steady as anticipated.
The MSCI All-World index held steady around 805.19, after reaching a record high on Wednesday when US markets were closed for a holiday. In Europe, the FTSE 100 hit session highs post-BoE decision, up 0.4 per cent on the day, with the STOXX 600 up 0.5 per cent.
The pound dipped 0.2 per cent to $1.2688 against the dollar, while the euro gained 0.1 per cent versus the pound at 84.53 pence. The euro slipped 0.1 per cent against the dollar to $1.0728.
'The stage is set for a UK rate cut. Data this week showed consumer inflation in May eased to 2 per cent, the lowest since 2021, although service-sector prices and wages remain robust,' said Dean Turner, chief economist at UBS Global Wealth Management for the euro zone and UK.
'To prevent inadvertent monetary tightening, the Bank will likely need to cut rates soon, mirroring its earlier rate hikes. The Swiss National Bank's move this morning underscores this trend. We anticipate the BoE will join in the rate cut cycle come August,' Turner added.
With pressure on the pound, the dollar index, measuring the US currency against six others, rose 0.2 per cent to 105.39.
Gold, which typically benefits from lower rates, rose 0.6 per cent to $2,339 an ounce, hitting its highest level since early June.
A surge in tech stocks earlier in the week, led by AI chipmaker Nvidia surpassing Microsoft as the world's most valuable company, sparked a global rally in tech shares.
US markets, closed for a holiday on Wednesday, saw stock futures in positive territory on Thursday, with Nasdaq 100 futures up 0.6 per cent compared to a 0.4 per cent rise in S&P 500 futures.
'Nvidia remains pivotal globally,' noted Chris Weston, head of research at Pepperstone.
Weston cautioned, however, that market breadth has been narrow, with limited participation, suggesting a fragile foundation underpinning the rally.
'The market is heavily focused on AI and big tech. Absent immediate risks, the path of least resistance points to higher equity index levels.' Investors await further data for clues on when the Federal Reserve might initiate rate cuts, after projecting just one cut this year. Fed policymakers this week have also adopted a cautious stance.
The Japanese yen on Thursday hit its weakest level against the dollar since late April, touching 158.41, driven by the wide interest rate differential between Japan and the U.S.__ Reuters
In commodities, Brent crude rose 0.3 per cent to $85.32 a barrel, while US crude for August delivery edged up 0.1 per cent to $80.77.
In a busy day for European central banks, the BoE maintained UK rates at a 16-year high of 5.25 per cent. However, it signaled a finely balanced decision, hinting that an August rate cut could be in play.
The Swiss National Bank cut interest rates for the second time this year, pressuring the Swiss franc, while Norway's Norges Bank held rates steady as anticipated.
The MSCI All-World index held steady around 805.19, after reaching a record high on Wednesday when US markets were closed for a holiday. In Europe, the FTSE 100 hit session highs post-BoE decision, up 0.4 per cent on the day, with the STOXX 600 up 0.5 per cent.
The pound dipped 0.2 per cent to $1.2688 against the dollar, while the euro gained 0.1 per cent versus the pound at 84.53 pence. The euro slipped 0.1 per cent against the dollar to $1.0728.
'The stage is set for a UK rate cut. Data this week showed consumer inflation in May eased to 2 per cent, the lowest since 2021, although service-sector prices and wages remain robust,' said Dean Turner, chief economist at UBS Global Wealth Management for the euro zone and UK.
'To prevent inadvertent monetary tightening, the Bank will likely need to cut rates soon, mirroring its earlier rate hikes. The Swiss National Bank's move this morning underscores this trend. We anticipate the BoE will join in the rate cut cycle come August,' Turner added.
With pressure on the pound, the dollar index, measuring the US currency against six others, rose 0.2 per cent to 105.39.
Gold, which typically benefits from lower rates, rose 0.6 per cent to $2,339 an ounce, hitting its highest level since early June.
A surge in tech stocks earlier in the week, led by AI chipmaker Nvidia surpassing Microsoft as the world's most valuable company, sparked a global rally in tech shares.
US markets, closed for a holiday on Wednesday, saw stock futures in positive territory on Thursday, with Nasdaq 100 futures up 0.6 per cent compared to a 0.4 per cent rise in S&P 500 futures.
'Nvidia remains pivotal globally,' noted Chris Weston, head of research at Pepperstone.
Weston cautioned, however, that market breadth has been narrow, with limited participation, suggesting a fragile foundation underpinning the rally.
'The market is heavily focused on AI and big tech. Absent immediate risks, the path of least resistance points to higher equity index levels.' Investors await further data for clues on when the Federal Reserve might initiate rate cuts, after projecting just one cut this year. Fed policymakers this week have also adopted a cautious stance.
The Japanese yen on Thursday hit its weakest level against the dollar since late April, touching 158.41, driven by the wide interest rate differential between Japan and the U.S.__ Reuters
In commodities, Brent crude rose 0.3 per cent to $85.32 a barrel, while US crude for August delivery edged up 0.1 per cent to $80.77.