Britain’s central bank has stated that it will take “whatever action is necessary” to stabilise the country’s economy.
With the Bank of England cutting interest rates and reviving its bond buying program to cushion Britain’s economy from the shockwaves of its referendum, stock markets around the globe rose in respond to this move while the sterling continued to tread on a slippery downward slope.
The Bank of England has cut its main rate by quarter percentage point to a record low 0.25%. More significantly, it has stated that it would take “whatever action is necessary” in order to bring about economic stability following Britain’s shocking decision to leave the European Union.
While the cut in interest rate was widely accepted, the revival of the bond buying program and other measures weren’t.
“The Bank of England has hit a perfect ‘High Five’ at today’s meeting, over-delivering against market expectations and bucking the recent trend of central banks disappointing,” said Nick Gartside, a portfolio manager at JP Morgan Asset Management.
So as to give the move a thumbs up, MSCI’s world stocks index which tracks rose by 0.33% thus snapping its 3 day losing streak. However, Wall Street was fairly subdued as investors await the roll out of today’s U.S. payrolls report.
“Folks would probably prefer to wait on those numbers before they make a commitment in front of them,” said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.
Although the unemployment levels rose unexpectedly last week in the U.S, with orders for factory goods falling for a straight second month, the labour market has however remained healthy and is likely to continue to support economic growth.
Meanwhile Europe’s FTSEurofirst 300 index rose by 0.72% to 1,331.68 to touch its zenith in the past two weeks. The move was supported by industrial and financial stocks, including Siemens AG and Aviva Plc.
For Britain however, the picture wasn’t this rosy as the sterling fell by 1.52% to $1.3120, its biggest one day drop against the greenback.
“Sterling/dollar has weakened in line with our view and we still see scope for further downside in the pair,” said Sam Lynton-Brown, FX strategist at BNP Paribas in London.
The dollar index, which tracks the greenback against a basket of six major currencies, drew strength from the fall of the sterling and was up by 0.22% to 95.773.
The rising strength of the dollar has kept a lid on surging gold prices, after BoE’s decision.
Spot gold prices were up 0.21% to $1,360.41 an ounce.
Categories: Economy & Finance, Strategy
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