Markets

GBPEUR: Pound to Euro - GBP spikes on hawkish BoE report….

GBPEUR: Pound to Euro - GBP spikes on hawkish BoE report….

Leading economists last week said the BoE will raise rates faster than market expectations, predicting two hikes this year on the back of a stronger United Kingdom economy.

The BoE added Thursday in its latest quarterly forecasts that British gross domestic product (GDP) was expected to grow by 1.8 percent this year.

The central bank also notably raised its growth forecasts, predicting that the United Kingdom economy will expand faster than expected in 2018 and 2019.

ING economist James Smith said the bank "caught markets off-guard with its surprisingly bullish outlook for the economy and interest rates".

A day after the Bank of England hinted that it could raise interest rates faster than many expected, a run of economic figures on Friday suggest the British economy did not end 2017 as strongly as previously thought. That was upgraded from previous guidance of 1.7 percent.

The bank largely attributed this to the lack of capacity in the United Kingdom economy, although the BoE did note that the uncertainty surrounding Brexit could still affect businesses and consumption and weaken output growth.

"The expansion is becoming increasingly broad-based and investment driven".

"Arguably, the pound could have strengthened even further (on the BoE) if it were not for less favourable external conditions", said MUFG currency strategist Lee Hardman.

Model 3 Delays Create Losses for Tesla
However, Tesla reported that combined orders for Model S and Model X "grew significantly" in 2017 as compared to the year prior. For the whole of 2017, 101,312 units of the Model S and Model X were delivered - an increase of 33% over the previous year.

"UK net trade is benefiting from robust global demand and the past depreciation of sterling". This scenario, however, will leave inflation above 2% in three years, which can be judged to increase interest rates with more than the expectations of investors.

"It's likely the path of interest rates required to get inflation back to target over the medium term is itself slightly higher", Broadbent said in an interview with the BBC.

"There will be ups and downs in financial markets, and the Brexit process will twist and turn before it is concluded", Carney told reporters, stressing any rate rises would be gradual and limited.

If one isn't agreed on around that time, he said the bank will assess the impact on economic confidence and business activity.

In recent times however, sterling has built up some strong gains against the dollar.

Policymakers unanimously made a decision to maintain the quantitative easing at GBP 435 billion.

Price rises accelerated across the United Kingdom during 2017 after Britain's referendum vote in favour of leaving the European Union pushed down on the pound, hiking the cost of imported goods.

The interest rates in the United Kingdom were raised for the first time in a decade in November, and now the attitude is that the next hike will come faster than expected.


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