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Currency Wars

Currency Wars

Yesterday, the Bank of England announced its latest interest rate decision. As widely predicted, there was no change and with that the markets went about their business, focussed on other matters and carried on as if nothing had happened. Which of course, it hadn’t.

Rumours of “currency wars” are starting to cause ripples in the market as traders ponder  whether different central banks are competing to weaken their currency. We saw this earlier in the week when the Fed voiced concern over the strength of the Dollar and implied that they were not overly comfortable with this strength. This initially caused Dollar weakness but we have since seen this reversed. The Japanese Yen is certainly not winning any potential war as it continues to strengthen despite the wishes of the Bank of Japan.

Mario Draghi and German Finance Minister Wolfgang Schaeuble highlighted the issues that the Eurozone economy faces as they voiced their differing opinions on a recovery. Draghi feels that after interest rate decreases and the ECB issuing cheap loans, the purchase of government bonds is the next most likely step. Draghi has implored European Governments to be proactive and aid the recovery as he feels they have dragged their feet on structural reforms.Schaeuble, on the other hand, warned against quantitative easing and urged continued budgetary discipline. Draghi, also forecast rate hikes in 2017.

The G20 and IMF meetings continue today and the main data out are trade balance reports from the UK, unemployment rate from Canada and speeches from the various members of The Fed.

Have a good weekend all, and everyone at Currency UK wishes Chelsea Ladies good luck as they go into their final game of the season.

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