The Bank of England made a decisive move by increasing interest rates by 0.50%, bringing the Bank rate to 5%, the highest it has been in 15 years. This decision was supported by a 7-2 split vote.

It is expected that there will be further rate hikes, and the projected peak rate by the end of the year is now estimated to be above 5.50%. This will have a significant negative impact on the growth prospects.

Inflation exceeded expectations across all measures once again. The headline inflation rate remained at 8.7%, while the core metric rose to 7.1%.

The UK economy is particularly sensitive to changes in interest rates, and the performance of the housing market has a significant influence on overall economic activity. The cost-of-living crisis further exacerbates the unique challenges faced by the economy.

In the United States, Federal Reserve Chairman Powell indicated that another rate increase next month is highly likely, pending data analysis, following a pause in rate hikes this month.

The European Central Bank continues to adopt a hawkish stance, and it is now predicted that there will be up to two additional rate hikes.

In terms of global market sentiment, the relationship between the US and China has taken a more positive turn, which bodes well.

In the foreign exchange markets, conflicting signals have resulted in a lack of clear conviction or trend. While interest rate differentials continue to be a significant driver, higher rates in the UK could put pressure on the value of the British pound as it weighs down economic growth. The GBP/USD pair remains volatile within the range of 1.2500 to 1.3000, while key levels to monitor for the GBP/EUR pair are 1.1500 to 1.1750.