Key insights
- Increased geopolitical tensions in the Strait of Hormuz and political uncertainty in the UK have led investors to increase bets on Bank of England rate hikes. UK rate futures now price in approximately 68 bps of tightening by December. While this news directly impacts UK markets, the global nature of inflation and monetary policy suggests a slightly negative influence on US equities, as higher rates globally could tighten financial conditions.
LONDON, May 12 (Reuters) - Investors increased their bets on the Bank of England raising rates in the coming months as global markets responded to the latest increase in tensions in the Strait of Hormuz and as Prime Minister Keir Starmer was battling to stay in power.
UK rate futures on Tuesday pointed to around 68 basis points of BoE policy tightening by December - approaching a full pricing of three quarter-point rate hikes - up from about 56 bps on Monday.
Investors were pricing three European Central Bank rate hikes this year.