The pound fell sharply yesterday afternoon, weakening by over 1% against the euro, following the Bank of England’s decision to raise interest rates in the UK by 50 basis points to 1.75%. This morning sterling has made a slight recovery.
While this hike was largely priced in by markets, BoE governor Andrew Bailey said that the UK is expected to enter a recession in the final quarter of 2022, which sent sterling lower. This recession is anticipated to last until the end of 2023.
Bailey also warned that inflation will likely hit 13% in October, the highest level in 42 years, and another 50 basis point interest rate hike may be needed in September.
This morning, data revealed that UK house prices have fallen for the first time in more than a year. The average price of a home was £293,221 in July, down 0.1% month-on-month.