Daily Archives: June 7, 2012
Bank of England keep rates unchanged and halt QE for now!!
Sterling has been boosted during afternoon trade as the bank of England decided to keep the base rate of interest on hold at 0.5% and did not initiate any further monetary stimulus.
With all the jubilee celebrations over the long bank holiday weekend the UK market was closed for business. Yesterday when the UK was up and running again you would have seen that the currency markets continued to move and over the course of this week sterling exchange rates weakened by roughly 2% against a range of currencies. This decline was more than likely down to the markets pricing in further QE from the Bank of England.
The pound has now moved away from the 4 month low against the USD, trading up at 1.5570. While against the Euro we have gained from 1.2290 to 1.2398. Britain’s dominant services sector grew at an unexpectedly steady pace in May and retailers saw a solid bounce-back in sales so this too has helped the pound move away from the risk of QE in the near term.
I personally feel that this will be the average rate over the coming weeks and months for the pound against both the Euro and US Dollar. My recommendation would be that if you can trade above or below this level (depending on if you are buying or selling Euros or Dollars) then you should look at forwards if you do not need the funds imminently. To take the risk on your hard earned cash in some of the most uncertain times we have seen for a long time could be foolish. You do not want to get your fingers burnt by holding out for a cent or so more to end up losing 2 or 3.
Here at www.poundsterlingforecast.com we offer clients impartial opinions on when may be a good time to maximise your exchange and to explain all teh options that are available to you to help you minimise your risk to extremely volatile financial markets. If you are not a currency speculator and would like me to explain how we can help you make a saving on your exchange please feel free to email me at bma@currencies.co.ukwith your contact details and I will conatct you to discuss the options that are available to you. Alternativly you can call me on the number on the side of this page, it will bring you straight through to the trading floor and I will make myself available to speak with you. Just ask for Ben Amrany.
Ben Amrany
Short term Sterling movements hinging on the Bank of England Interest Rate meeting at 12:00 today
Today is one of the key days of the month for anyone with an interest in the value of sterling as once again it is the time for Mervyn King and the remaining 8 members of the Monetary Policy Committee to release the latest interest rate decision. Recently Christine Legarde, the head of the International Monetary Fund, has been calling for the Bank to cut rates from the already record low of 0.5%, a move that I personally would find very surprising and unlikely. I, as with many of my colleagues, believe rates will remain on hold at 0.5% and as a result it is unlikely the pound will experience too much movement. To me what is far more important for the short term direction in Sterling exchange rates will be whether the Bank has decided to extend QE (Quantitative Easing).
QE is a subject that we have touched on numerous occasions and quite honestly might be a little tedious for regular followers of this website, however its importance cannot be avoided. In its simplest term it is the act of the Bank printing more money in order to get the high street banks lending, give the economy a boost and in theory help the UK economy dig itself out of recession. Its fundamentals are far more technical than that but you can do your own research should you wish!! What is important however is the affect ‘printing money’ has on the value of the host currency. Again if you look at a simple ‘supply’ and ‘demand’ model, the more of a product the cheaper it becomes and the same is the case for currency. Should more Sterling be introduced to the money supply then the value of Sterling will fall, hence a pound becomes less valuable – for this reason should you be transferring Sterling to any currency today or in the coming days and weeks, then an extension of QE should cause concern. I personally feel today may be a little too early for the bank to increase QE, however I think it is very much at the forefront of the MPC’s mind. Should QE not be extended we may see a small spike for the pound, but be in a position to take advantage as I do feel further monetary stimulus is just around the corner.
Do discuss my views and to run through the service we provide at currencies.co.uk then please email Mike at mgv@currencies.co.uk and I will happily run through my thoughts and opinions to try and help you make the best decision when it comes to your individual transfer.
