The Bank of England hiked into the selloff. The Fed may be next.

The hike

The Bank of England has raised interest rates for the first time since 2023. J.P. Morgan's foreign-exchange team says the Bank voted 8-1 for a 50 basis point hike, and that the Bank's growth forecast for the UK is above 2% for 2026. The hike landed in the middle of a week when global markets were already volatile following the US election results and a significant tech-sector sell-off. m:…6536 m:…2726

The Bank's own survey of market participants suggests the hike is not expected to be reversed soon. The November 2026 Market Participants Survey received responses from 80 participants, who expect the Rate to be 4.25% following the February 2027 meeting, and the median expectation for the neutral Rate is 3.50%. Energy and related commodity price developments are the most important factor informing near-term Rate expectations, with a mean weighting of 30.3%. Participants expect annual CPI inflation to be 3.8% at the end of the fourth quarter of 2026, and long-run potential annual UK GDP growth to be 1.5%. m:…3559

The Fed is being repriced the same way

Across the Atlantic, the market is pricing the same direction of travel. The US job report showed gains of 165,000 jobs versus a consensus of 70,000, according to J.P. Morgan's rates team, and markets are pricing 17 basis points of Fed tightening by December, according to Scotiabank. Chair Walsh is unwilling to commit to a tightening bias, J.P. Morgan says, reminiscent of the July FOMC meeting — but the market is committing on the Fed's behalf. m:…7465 m:…8019

The plumbing is changing too. In 2027, one FOMC meeting will not feature a policy decision, and in 2028 and beyond, two meetings will not feature a policy decision, J.P. Morgan notes, and reducing the number of meetings at which a policy rate change can occur concentrates variance and may bias implied volatility higher. The US Treasury left nominal coupon, floating-rate-note and TIPS auction sizes unchanged in the latest quarterly funding announcement, and plans to issue new seven-year notes quarterly rather than monthly starting in March 2027. m:…7465

The dollar does the quiet work

While rates were repriced, the dollar did what it does in a selloff. J.P. Morgan's FX team argues that US economic data supports a constructive dollar stance, while the recent deleveraging in AI-linked equities introduces volatility and lowers overall conviction. The team says the dollar has a 1% bid for every 5% drawdown in global equities, and that the US dollar is currently long-positioned. US payroll data shows growth exceptionalism is intact, the team says, even as AI equity returns face a deleveraging event. m:…2726

Scotiabank's daily note records the same pattern: the US dollar is strengthening against both major and commodity currencies, and the KOSPI index declined by 6% on the day. Iranian attacks on ships in the Strait of Hormuz have caused renewed geopolitical deterioration, the bank notes, and the Nikkei 225 index is 22% below its June peak. The rest of the week's data points the same way: gold prices climbed to around $4,085 per ounce, and the Indian government released INR 1.09 trillion to states as tax devolution. The rate story has flipped. The question for the rest of the year is not whether central banks will cut, but how many of them will hike. m:…8019 m:…6536