Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Bank of England Hike, Trade Surplus Surprise, SOMP To Come

Friday, 5th August, 2022

Daily Flows

  • Yesterday saw a range investors turning to a domestic BBB who was offering 4.20% for a year.
  • For those investors who were wanting to shorten their investment term, 2.95% was the best for 3 months.
  • 4 month NCDs were popular, with investors seeing returns of +35 and a generous pick up from 3 month returns.

Bank of England Hike

  • The Bank of England hiked by the largest amount in 27 years, lifting the cash rate by 50 basis points to 1.75%.
  • With England facing serious inflation worries brought on by the Ukraine War, the Bank of England was left with no other lever to pull.
  • Energy prices are the largest contributor to inflation worries within the European Region. However, there is a distinct lack of fiscal support in England, when compared with other European countries.
  • This forced the BoE to act more strongly to combat inflation. Future hikes of similar magnitude are expected in the coming meetings.
  • Most importantly, the BoE forecasted 5 quarters of negative growth – a truly grim outlook for the English economy.

Australian Trade Surplus

  • The Australian trade surplus data was released yesterday afternoon, which hit a record high of $17.7b.
  • Exports increased 5.10%, whilst imports only increased 0.70%.
  • Leading the way for exports was gold, which saw a 64% increase over the course of the month. This resulted in a $3.6b increase. Commodities were the second largest contributor.

Statement of Monetary Policy

  • The Statement of Monetary Policy is released today. Markets will turn to this for guidance on where the economy is heading and how far rates may head.

Nicholas Allan

Senior Associate