The pound has moved higher on balance this morning, as the currency looks to recover after its recent declines. The GBPUSD rate fell below the 1.34 handle to hit its lowest level of the year on Monday, but there has been a bit of a bounce this morning with buyers stepping in.
1-2 rate hikes per year over 3-year period
Overall, the inflation report hearings have seen little by the way of any fresh market moving developments but there are a couple noteworthy takeaways nonetheless. Perhaps the most striking were comments from Vlieghe, in which the MPC member said that his central forecast is for 1-2 quarter point increases to be needed per year over the 3-year forecast period. Should this forecast prove accurate then it would represent a fairly quick pace of tightening compared to current market expectations and therefore provide upside for sterling.
UK government borrowing at lowest level in a decade
The new fiscal year has shown the lowest net borrowing amount for April in a decade, with public sector net borrowing excluding banks falling by £1.6b Y/Y to £7.8B. This figure is quite a bit lower than many economists had expected according to recent surveys, and is in fact the lowest net borrowing for the month since 2008. The latest reading will be well received by fiscal hawks who want to see the budget deficit reduced and following on from last year’s figures which also beat forecasts in terms of lower net borrowing it appears that this is occurring at a faster pace than expected.
M&S announce 100 stores to close
The beleaguered retail sector has shown more signs of strain today with the announcement from Marks and Spencer (LON:MKS) that it will close 100 stores by 2022. The decision represents an acceleration of the reorganisation that began around 18 months in a move that is described as “vital” for the firm’s future.
Shares have fallen more than 3% in reaction to the news, with the stock languishing at the bottom of the index, which has itself managed to move above Monday’s peak to post another new record high. Despite a decent recovery in the past couple of months, the M&S share price has dropped by over a fifth in the last year and given that the firm is clearly looking to cut costs further there could be more weakness ahead.