UK M4 money supply growth edged up to 4.5% year on year in April, from 4.3% previously. The move points to a modest acceleration in broad money expansion compared with the prior month.<\/p>\n
The latest reading keeps annual growth in positive territory and marks a slight firming in the pace of monetary aggregate growth. No further breakdown was provided alongside the headline figure.<\/p>\n
We are noting the uptick in the UK’s M4 money supply to 4.5% year-on-year, which suggests underlying inflationary pressures are building within the economy. This continued expansion of broad money challenges the view that inflation will easily return to the Bank of England’s 2% target. Historically, such increases in liquidity have often preceded periods of higher consumer prices, a pattern seen during 2021.<\/p>\n
This data forces us to reconsider the Bank of England’s path, making a more hawkish stance increasingly likely in the coming months. We believe the market will continue to price out any potential rate cuts for 2026, a sentiment already reflected in SONIA futures which now imply less than a 25 basis point cut by year-end. As of this morning, the UK 2-year gilt yield has already responded by climbing to 4.68%, its highest level in over a month.<\/p>\n
Given this, we see strength in the British Pound against currencies with central banks that are poised to ease policy, such as the Euro. Traders should consider positioning for a stronger GBP, possibly through call options on GBP\/EUR to define risk. Recent foreign exchange data shows a reduction in short positions against the pound, indicating that broader market sentiment is already beginning to shift.<\/p>\n
For fixed-income traders, the implication is further upward pressure on UK government bond yields, particularly at the short end of the curve. We expect the 2-year gilt yield to test the 4.75% level in the coming weeks, especially if upcoming wage or service inflation data remains high. We would look at shorting short-term gilt futures or using interest rate swaps to position for a “higher-for-longer” rate environment.<\/p>\n
This outlook presents a mixed picture for UK equities, with higher borrowing costs acting as a headwind for growth-sensitive stocks. We would be cautious on rate-sensitive sectors like real estate and utilities, which have high debt levels. However, UK banking stocks could outperform, as they typically benefit from higher net interest margins in a rising rate environment.<\/p>\n","protected":false},"excerpt":{"rendered":"
UK M4 money supply rose to 4.5% in April, boosting hawkish BoE bets, GBP, yields.<\/p>\n","protected":false},"author":103,"featured_media":17022,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[48,77,100,109,46],"class_list":["post-54423","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates","tag-equities","tag-gbp","tag-inflation","tag-markets","tag-policy"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t