The result of the UK stress tests are out. It was really a tale of two cities on one hand the likes of Barclays and HSBC coming out the other end with their hugely profitable operations. On the other hand Lloyds, Cooperative and RBS were short the mark. These banks have been blighted with problems from server failures in India to Executive sackings in the UK, it is no surprise they failed to achieve the desired targets. All said and done the BoE is satisfied with the results of the stress test. The big question is whether this is the cue from the BoE that interest rates will go up next year?
On the reverse picture we see the inflation rate has fallen to 1% from 1.3% and has actually dropped negative from last month to -0.3%. The market had a morning reaction to the stress test new but what will the longer term picture present? Will Carney risk the recovery with a rate hike? Sterling is trading at 1.5700 at present with 1.5750 as the potential breach point for the upside and 1.5603 as the downside potential breach level. Sterling is trading a tight range so any potential move is likely to be strong.
GBP/USD Daily chart