To pare inflation, The Bank of England raised its key borrowing rate 25bp to 5.75 percent, as growth in the United Kingdom accelerated to its fastest pace in three years. The hawkish BoE has now raised rates for the fifth time in one year which in turn has boosted the British pound to breach 26 year highs of 2.0207.
[B][U]UK Headlines:[/U][/B]
Telefónica?s O2 mobile phone business was poised to close a deal as Apple?s exclusive network partner for iPhone in the UK.
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[I]-Source: Financial Times[/I]
The government launched a bid to protect the use of “control orders” which allow terrorism suspects to be held under partial house arrest without being convicted of a crime.
Anti-terrorism powers legal bid | Reuters
[I]-Source: Reuters UK[/I]
In an attempt to reduce inflation, the Bank of England raised their benchmark interest rate to 5.75 percent as "the pace of expansion of the world economy remains robust."
http://www.bloomberg.com/apps/news?pid=20601087&sid=abLV1BnGzIpE&refer=home[I]-Source: Bloomberg[/I]
[B][U]UK Market Activity:[/U][/B]
[I][U]Currency Markets:[/U][/I] [B]GBPUSD[/B]
To pare inflation, The Bank of England raised its key borrowing rate 25bp to 5.75 percent, as growth in the United Kingdom accelerated to its fastest pace in three years. The hawkish BoE has now raised rates for the fifth time in one year which in turn has boosted the British pound to breach 26 year highs of 2.0207. In their official statement the BoE articulated that: “the balance of risks to the outlook for inflation in the medium term continued to lie to the upside.” The markets eagerly await the minutes from the MPC meeting, due to be released on Wednesday, July 18th, in order to gauge the probability of further hikes. Currency analysts reference short-sterling futures as a proxy for interest rate expectations, and the implied yield on the December contract is currently trading at a record high of 6.33 percent, hinting that interest rates could reach 6 percent by years end.
[I][U]Equity Markets:[/U][/I][B] FTSE 100[/B]
Top London equities ticked lower in today?s session, easing .57 percent before reaching the close at 6635.20. Laggards of the FTSE 100 Index included Wolseley and Vodafone which slipped 2.63 and 2.4 percent, respectively. Wolseley, the world?s largest distributor of plumbing and heating supplies closed down at 1183p under the pressure of six-year high UK interest rates, as their capitalization is highly leveraged. Shares of the world?s largest mobile phone firm, Vodafone, declined to 164.2p as the newly released iPhone from Apple grapples with competing networks for service contracts.
[I][U]Fixed-Income Markets:[/U][/I] [B]10-Year Long Gilt[/B]
Fixed income instruments resume their bear run as yields break-out to the upside on robust global growth picture. Soaring 72.9bp this year, yields on the British 10-year gilt gained 3bp to 5.515 percent late in UK trading. With many central banks in the midst of major tightening cycles, debt traders sell issues on the mounting concern of further increased rates to curb inflation. Researchers at Citi calculate a “global bond yield” from a compilation of 26 counties would be valued at 3.8817 percent, up 47bp since December and solidifying bleak prospects for bond prices.
