BoE divides money managers in bets on UK markets trade

BoE divides money managers in bets on UK markets trade

Bloomberg / London

Investors are at odds on how to trade UK markets as they question just how much the Bank of England will hike interest rates next year.

That’s leading money managers at Goldman Sachs Asset Management and Allianz Global Investors to bet against the pound, in opposition to State Street Corp, which thinks the currency looks cheap and worth buying on dips given the chances for policy tightening.

For all their disagreement, they still expect fewer hikes than the multiple moves seen by money markets, following a surprise pause by the BoE this month. While policy dilemmas are being faced by central banks around the world, trying to avoid imperilling a recovery from the pandemic, the BoE is dealing with fresh Brexit trade concerns and labour shortages thrown into the mix.

“Volatility always creates opportunity, and we think the opportunity now is to bet against the super-aggressive rate hikes that are priced in,” said Mike Riddell, who manages about $9bn at Allianz, and is positioning for a slide in sterling and a rally in UK bonds. He believes growth and inflation should drop sharply from the second quarter to reduce the chances of further BoE policy tightening.

It’s a worry