U.K. ETFs slide after BoE announced its largest rate hike in 33 years
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U.K.-based exchange traded funds drifted lower in the early part of Thursday's trading as the Bank of England raised interest rates by 75 basis points from 2.25% to 3.00%. The hike marked the central bankâs largest increase in 33 years and has added pressure to U.K.-based stocks.
Funds that have found themselves lower include the iShares MSCI United Kingdom ETF (NYSEARCA:EWU), which dropped 0.7%. EWU is the largest U.K.-focused ETF with $2.81B tied to its name.
Other funds that are trading to the downside include (FLGB) -1%, (EWUS) -2.4%, and (FKU) -1.5%.
Additionally, the Invesco CurrencyShares British Pound Sterling Trust (FXB) is also lower by 1.5% with the British pound weakening 1.5% against the U.S. dollar (DXY).
In response to the sizable rate hike, BoE Governor Andrew Baily stated in his press address, âIf we do not act forcefully now, it will be tougher later on.â
Moreover, the BoE announced that, based on interest rate and model forecasts, inflation levels in one yearâs time should come down to 5.20%. At the moment U.K. CPI Y/Y sits slightly above 10%.
Along from U.K.-based ETFs, high-profile U.K. based stocks also lost ground on Thursday. A handful of examples include the names such as:
Barclays (NYSE:BCS) -2.5%, Vodafone (VOD) -2.3%, HSBC Holdings plc (NYSE:HSBC) -1.3%, GlaxoSmithKline (GSK) -1%, AstraZeneca PLC (AZN) -0.5%, and Unilever PLC (NYSE:UL) -0.5%.
The BoE also predicted that a two-year recession is possible if rates remain high.