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Are European interest rate rises on the table?


Following on from the comments by Bank of England Governor, Mark Carney and European Central Bank President, Mario Draghi this week, the European region is sending out positive messages for potential interest rate rises, which is very much at odds with US Federal Reserve Board of Governors Chair, Janet Yellen, who is downplaying the possibility of further interest rate hikes.

“We may be seeing a change in the positioning of the US, UK and Europe as to who will be tightening and when.” noted ADS Analyst Konstantinos Anthis. “The Fed seems close to concluding all they can do for the dollar this year with only one more rate hike on the cards, which traders now think will come in September or December.”

“But in Europe the euro is benefiting from market’s expectations that the ECB has started thinking about reducing their stimulus in light of the improving conditions in the Euro area. “And, in the UK The Bank of England joins the club banks turning hawkish after Governor Carney suggested yesterday that there’s a limit to the BoE’s tolerance for above-target inflation.”

“It is clear that the head of the central bank hints on a possible rate hike in the coming months – possibly August – in an attempt to bring the rallying inflation figures under control.”

A strong showing from the Pound over Mark Carney’s positive tones has not had the negative impact on the FTSE this morning that investors would expect, given recent trends. Spreadex Analyst Connor Campbell noted “the UK index surged half a percent after the bell, largely thanks to the sea of green in its commodity sector.”

“Brent crude is up 0.8%, and is seriously eyeing $48 per barrel for the first time in a fortnight, while copper jumped 0.9%, aiding both the oil and mining stocks.”

“The banking sector is also pretty pleased with the ostensible shift at the BoE, with all the major players up around 1.5%.”

US equity markets rallied sharply yesterday after the Federal Reserve approved a range of pay-outs from the country’s six largest lenders. Accendo Markets Analyst, Mike van Dulken commented “Financial behemoth Goldman Sachs led the Dow Jones 140 points higher, while the S&P500 recorded its best single session since April on strength in the Financial sector.”

“Tech rebounded amongst the market bullishness, helping the Nasdaq to outperform, gaining 1.4%.”

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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