You may guess I am referring to the US Federal Reserve’s imminent decision on US interest rates. The markets are expecting a pause in rate rises, but not the beginning of reductions. What the Fed decides will always impinge on the options open to the UK’s rate setters, because UK rates must line up with US rates if Sterling is not to depreciate: Sterling depreciation is inflationary in the UK.
UK currency pointers (rising Pound) and Gilts pricing (jump up to higher yields) suggest that markets expect the Bank of England to adjust upwards this month, thereby being more hawkish than the Fed
As we will shortly know what the decisions are, I am not going to pontificate on what we can glean about market trajectory yet. I do however still see more of a positive attitude in investor behaviour at the moment.
To fill in for this week, I supply below anwers to some of the questions in my June 1st test! I will slowly work through all the questions. Some require longer answers than others.
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