GBPEUR new update – UK boosts bank lending
Last night Mervin King the head of the Bank of England announced additional stimulus into the UK financial sector. This includes a balance of £5 billion a month to become avalible for the bank to loan to high street banks, plus an extension credit line of an additional £100 billion over the next 12 months. The aim is to lower costs of borrowing for companies and inderviguals as the eurozone crises puts a “dark cloud,” over the UK market. All these funds are coming from new money that he was clear he did not want to be called Quantative Easing QE (see blog for definition of QE,) to avoid the normal reaction by the market when these words are muttered, however it is really more QE!
The bank has already pumped £325 billion into the economy through its quantative easing program. It has been commented that the QE done so far has not reached the people it waas enteneded for due to the eurozone crisis, the theory is that due to banks not being sure whether a fall out on the continent will result in addiitional funds being needed, they have slowed the release of funds which has pushing the cost of borrowing up for companies and mortgages.
Overall I think this is good news, even thought he markets will react negatively initially. We will however only see the results in the coming years not weeks, and we have to be aware that the UK economy is not exactly booming! I think it might be worth remembering readers that the UK is the only country in Europe that has had a double dip other than Italy!
Plus, of course, this news could all be over shadowed in the coming days due to the Greek election. The latest from Europe is that the markets punished borrowing yesterday cost for troubled countries. Spainish bonds went over the dangerouse level of 7%, (where Ireland, Portugal and Greece all needed huge bailouts.) Italy, which everyone shoud keep an eye on, also saw recorded costs. Yesterday they were paid over 6% to borrow money which is very unafordable in the medium term, they were paying 3.25% last month!
I think it is clear to say things are only going to get worse in the short term and as a result the markets will continue to become very volitile. If you are in the position needing to make a currency exchange in the weeks or months ahead, make sure you review your exposure TODAY before the greek elections. To put how big this weekend could be, it could fundermentally change the worlds second currency! Even some brokers are closing all limits and trades over the weekend in anticipation of what is round the corner!
You can email me directly here firstname.lastname@example.org quoting PSF in the subject title and I shall be more than happy to assist you both in terms of getting the best rate of exchange and a high level of customer service for your currency transfer. Otherwise feel free to call on 01494-787-478.
Eitherway I wish all traders good luck over the next few trading sessions!