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2026-05-26 17:51:31
[UK Data Misses Expectations Across the Board, Market Expectations for a 2026 Bank of England Rate Hike Cools Significantly] ⑴ A series of weak UK data released last week led investors to lower their expectations for a Bank of England rate hike in the coming months. Employment, inflation, retail sales, and the preliminary Purchasing Managers' Index all fell short of forecasts. ⑵ The weak data eased market concerns about aggressive rate hikes by the Bank of England. Currently, investors expect a 25 basis point rate hike by the Bank of England in 2026, with the probability of a second hike dropping to 60%. ⑶ Prior to last week's data release, the market had fully priced in two Bank of England rate hikes in 2026. The significant downward revision of expectations reflects the pressure of economic slowdown on the monetary policy path. ⑷ From a trading psychology perspective, the UK economic momentum has clearly weakened, making the central bank more hesitant to tighten policy. If subsequent data continues to be weak, the possibility of the market further lowering its rate hike expectations or even starting to discuss rate cuts cannot be ruled out. The pound sterling exchange rate and UK government bond yields may continue to face pressure from fundamentals in the short term.
