Just One Rate Hike at BOE

The ECB’s dovish tone makes a one-off U.K. interest-rate increase more likely

Interest-rate differentials between the U.K. and Germany are telegraphing a message of concern about the Bank of England’s rate trajectory ahead of an expected hike next week. Two-year gilts now yield more than 100 basis points over comparable bunds, improving the allure of the pound relative to the euro. “If the BOE were to continue hiking after November, this would cause sterling to appreciate versus the euro, which might have adverse consequences” for the U.K. economy, said Martin van Vliet, a strategist at ING Bank NV.

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