The prospect of a UK central bank (BoE) rate hike for December remains solid, but the pound sterling did not respond with a bullish reaction.
Pound sterling was pressured in the range of 1.3370s against the US dollar in trading this Wednesday (24/November).
The prospect of a UK central bank (BoE) rate hike for December remains solid thanks to the publication of the latest UK Purchasing Managers' Index (PMI) report and comments from BoE officials yesterday.
However, Sterling did not respond with a bullish reaction.
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| GBP/USD Daily Chart |
The preliminary UK PMI report for November 2021 has shown less signs of a pullback than market forecasts.
The PMI for manufacturing rose from 57.8 to 58.2, beating the consensus estimate of 56.3.
Meanwhile, the PMI for services only corrected from 59.1 to 58.6, or better than the consensus estimate of 54.6.
The UK PMI score compositely only corrected from 57.8 to 57.7, while denying the forecast for a decline to 54.1.
This report describes the situation in line with a series of other economic data from the UK last week.
The surge in production costs has forced many companies to raise prices at the consumer level, but demand remains high.
Consumer spending boosted new orders to hit the strongest pace since June, so that the business performs well and the economic recovery continues.
The labor market situation continues to improve.
"The combination of strong and sustained business growth, further improvement in the labor market, and high inflationary pressures, provided the green light for a rate hike (BoE) in December," said IHS Markit Chief Business Economist Chris Williamson.
The statement by a BoE official also underscored the prospect of a rate hike in December.
BoE Monetary Policy Committee (MPC) member Jonathan Haskel said the prospect of a rate hike from the emergency level would reflect policy success in the face of the worst economic shock in 100 years.
Sterling barely reacted at all to respond to the series of news.
The GBP/USD yesterday even posted a decline from the opening price of 1.3409 to the close of 1.3378.
This is because these reports convey the same message as previous reports, namely the rate hike in December.
The market has been considering the prospect of a December 2021 BoE rate hike long ago, so it no longer cares about additional data that are both pointing in that direction.
The biggest risk is if there is news that gives the opposite signal.
"The data coming in after the November MPC meeting has boosted our confidence in expectations for a rate hike at the next December meeting, but a delay to February is still possible," said Stefan Ball, Chief UK Economist at Goldman Sachs, "In the short term, the market continues to price in a much higher rate hike path than we expected."
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