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UK rates debate rumbles on as services surprise

Friday, November 03, 2017 - 01:52

Sterling falls to a one-month low as, despite a historic rate hike on Thursday, traders digest an apparently doveish set of future intentions from the Bank of England. New services data, though, hints at a UK economy that could be doing better than expected and helps the pound recover. David Pollard reports.

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Sterling hit a one month low as traders worried not so much about past events.... As future ones. Markets pushing back expectations for rate increases still to come - despite the first hike in a decade on Thursday. (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "To be clear ... the MPC continues to expect that any future increases in bank rate would be at a gradual pace and to a limited extent." So gradual, that amid Britain's Brexit uncertainty ... Many in the markets don't see a further hike until late next year Or, perhaps, that it's already 'one and done', according to a forex analyst. Even those who agree with the hike wondered whether the timing was right. (SOUNDBITE) (English) LCG SENIOR ANALYST, JASPER LAWLER, SAYING: "We're looking at a softening economy and so typically you raise rates in order to decelerate an economy that's overheating. That's not obviously taking place at the moment." But the main driver of the UK economy may be running a bit warmer than thought. October's PMI reading for the services sector jumped to 55.6 from 53.6 .... Its highest in nearly half a year. Inflation pressures, the survey shows, remain strong. (SOUNDBITE) (English) NEIL WILSON, SENIOR MARKET ANALYST, ETX CAPITAL, SAYING: "It just confirms that the economy's doing fairly well. It's not overheating by any means. It's chugging along quite nicely." And even a rate hike itself could be a cue - for more confidence. SOUNDBITE) (English) FIXED INCOME STRATEGIST AND HEAD OF CAPITAL MARKETS AT MINT PARTNERS BILL BLAIN, SAYING: "As rates start to normalize, entrepreneurs realize that this is now a time to be reinvesting in new plant, capital expenditure, building new factories and creating jobs that are fundamentally worth more than the kind of jobs we've seen created now." For the time being, sterling may try to ride on that thought. The new data helping it to recover some of Thursday's losses - and hit a day's high.

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UK rates debate rumbles on as services surprise

Friday, November 03, 2017 - 01:52