Traders are ramping up bets on the Bank of England cutting interest rates this summer amid optimism that the US Federal Reserve is poised to begin reducing borrowing costs in America. Money markets indicate there is more than a 50pc chance that policymakers will cut rates in Britain next week - with a 92pc chance of them doing so by September. Traders began ramping up bets on a summer rate cut today, up from a 45pc chance on Wednesday, as money markets indicated a rate cut in the US was becoming more likely.
Data today showed an unexpected slowdown in consumer spending on durable goods like cars and washing machines, dropping by 6.6pc despite predictions it would rise by 0.3pc.
The figures cemented bets on the Federal Reserve cutting interest rates in September, which is now fully priced in. Money markets showed confidence in rate cuts despite official figures showing the American economy expanded faster than expected in the second quarter of the year. US GDP grew by 2.
8pc in the three months to June, according to the Commerce Department, which was much faster than the 2pc that had been predicted by analysts. Stephen Brown, deputy chief North America economist at Capital Economics, said: “The sharper-than-expected pick-up in second-quarter GDP growth to 2.8pc annualised should make the Fed a bit more comfortable about keeping policy unchanged next week, but the recent loosening of labour market conditions and signs of slower price growth still mean that there is a strong ca.