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ECB turns hawkish

Today's news headlines:

‘ECB raises rates for the first time in more than a decade’. In the first rate rise for 11 years, the European Central Bank raised interest rates by 50 basis points yesterday. This increase was twice the size indicated by the bank last month as it attempts to prevent escalating borrowing costs from instigating a European debt crisis. Importantly, two new developments from the release were a new crisis response tool, called the Transmission Protection Instrument (TPI), and an ostensible end to forward guidance. The announcement followed the resignation of Italian Prime Minister Mario Draghi. Italian stocks and bonds sold off in the aftermath yesterday, with the ten-year bond yield jumping to 3.7%. (Financial Times)

‘Pakistan’s rupee falls fast as debt fears intensify’. Amid concerns that Pakistan will follow in the footsteps of Sri Lanka to become the next emerging market to default on its foreign debt, the Pakistani Rupee fell nearly 7% this week to RS226 to the US Dollar. This follows a $1.2 billion loan from the International Monetary Fund to the South Asian nation, which is feared not sufficient to prevent a balance of payments crisis. Earlier this month, Pakistan’s central bank raised the country’s interest rates by 125 basis points to 15% in an attempt to boost demand for the currency and manage inflation. This week Fitch Ratings altered its outlook on the country from stable to negative. (Financial Times)


Overnight, European markets are trading modestly lower while US futures point to the downside. Cable is trading 60 basis points higher this morning, and Oil appreciated.


UK GfK Consumer Confidence: -41 vs -41 last month
German flash Manufacturing Purchasing Managers’ Index: 49.2 vs 52 last month
German flash Services PMI: 49.2 vs 52.4 last month
Eurozone flash Manufacturing PMI: 49.6 vs 52.1 last month
Eurozone flash Services PMI: 50.6 vs 53 last month
UK flash Manufacturing PMI: 52.2 vs 52.8 last month
UK flash Services PMI: 53.3 vs 54.3 last month

Interbank rates:

GBP/USD – 1.1923
GBP/EUR – 1.1762
EUR/USD – 1.0140
USD/CAD – 1.2890

The markets are moving. To speak to our team, please call +44 (0)20 3465 8200.