The Bank of England (BoE) and US Federal Reserve raised their interest rates by 75 bps last week. European equities rose in value, whilst US equities tumbled after hawkish comments from Chairman Powell threw away hopes of a dovish pivot.
Powell stated that it is “very premature” to consider pausing rate hikes. He also stated that incoming data since the last meeting suggests the terminal rate will be higher than previously expected.
The BoE rate hikes marks the highest level since 2008. Governor Bailey’s strong pushback against the policy path discounted in markets suggests policymakers will put more weight on minimising the negative impact than fighting inflation.
In light of these policy changes, US treasury yields rose on the week, with the 2-year yield climbing to a 15-year high of 4.75^%. The 10-year yield also rose to 4.16% on Friday. The US dollar gained against the pound and euro to 1.14 GBP/USD and 1.00 EUR/USD.
The US non-farm payrolls data showed an increase by 261k in October, which is above the consensus estimate. In other news, the unemployment rate rose by 20 bps to 3.7% because of job declines in the house survey. The labor force participation rate decreased to 62%, and hourly earnings growth grew 0.37% month-on-month.
One notable insight was in the Eurozone as the natural gas prices continued to decline amid mild weather and muted demand. ?Oil prices have gained, however, amidst rumours that China was considering a relaxation of its zero-COVID policy.
