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The United Kingdom’s gilt prices disappointed on Wednesday despite a decline in the country’s manufacturing PMI for the month of July. Investors will now be awaiting the Bank of England’s (BoE) monetary policy meeting, scheduled to be held on August 2 by 11:00GMT for further direction in the debt market.
The yield on the benchmark 10-year gilts, jumped 3 basis points to 1.36 percent, the super-long 30-year bond yields climbed 1-1/2 basis points to 1.78 percent and the yield on the short-term 2-year traded 2 basis points higher at 0.78 percent by 09:45GMT.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to a three-month low of 54.0 in July, down from 54.3 in June and well below the highs achieved around the turn of the year. That said, the PMI remains comfortably above its long-run average of 51.8. July saw the weakest rate of expansion in UK manufacturing output in 16 months, as production growth was stymied by a concurrent easing in the pace of increase in new orders. The domestic market was the main focus of the slowdown in new business growth, as new export work increased at the fastest pace for six months.
The Bank of England (BoE) is expected to hike the benchmark Bank Rate from 0.50 percent to 0.75 percent, as activity indicators have rebounded and the unemployment rate is low, according to a recent research report from Danske Bank.
While the central bank is still believed to be too optimistic about the inflation outlook, it seems that Mark Carney and company are more concerned about overheating the economy. Despite growth on average being lower now than before the Brexit vote, it is still sufficient to absorb the remaining slack, as potential GDP growth has declined as well.
Meanwhile, the FTSE 100 slumped 1.07 percent to 7,665.12 by 10:10GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -9.49 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
