Home > Resource Hub > Daily Market News > ECB and BoE announcements balance out each other

ECB and BoE announcements balance out each other

ECB and BoE announcements balance out each other

The Bank of England (BoE) surprised the majority of the market yesterday, when they announced an additional £75 billion of ‘Quantitative Easing’, or ‘asset purchases’ as Sir Mervin King prefers. This is the process where the BoE creates money to buy government bonds from pension funds and banks in order to inject additional money in to the market. Yields on Government debt are also pushed down through the increased demand. Unfortunately, it also creates inflation but Sir King believes that inflation could drop below the 2% target by the end of 2013 due to the deteriorating World economy.

Sir Mervin King stated that “this is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever.” The slowdown in the US, China and Europe were seen as the primary reasons for additional stimulus. The Euro zone in particular was seen as the biggest risk to the UK economy.

How Greece, Spain, Italy, Portugal and Ireland must look on with envy at events in the UK. Imagine being able to print money in order to purchase government debt, and therefore push down borrowing costs. Unfortunately, these countries are locked in a single monetary policy which is proving to be the main source of the problem, as these countries would not be targeted by the markets in the same brutal manner if they were able to print money or lower interest rates.

The ECB yesterday recognised the precautious positions of European banks announcing that, loans of 12 or 13 months will be offered to banks, making it easier for banks to access funds. Interest rates were kept on hold, but Mr Trichet announced that the decision was far from unanimous meaning that there could be a chance of a rate cut before the end of 2011.

The ADP survey suggests that nonfarm payrolls will rise by 50,000 in September, which is a little below the consensus. Call for a 59,000 rise. Private employment is expected to rise by around 91,000, but that could prove a little too pessimistic given the fact that 45,000 jobs should simply be created by the return to work of Verizon employees after their strike in August. The impact of Hurricane Irene on economic data remains uncertain; there is a small chance that we could even see a negative print. The employment components of ISM surveys have been extremely soft and any positive reading in September could easily slip back when October data are released.

What does this all mean for me? Well buying your EUR, USD, AUD or any other currency at the wrong time could cost you a fortune. There is no crystal ball but Currency UK can give you the information you need to make an informed decision.

Currency UK will then offer you the best exchange rates available and ensure that you subsequent international transfers are handled as quickly and as efficiently as possible.

Contact us now on +44 (0)20 7738 0777 or click here.

Share this case study
Set yourself up in minutes, make payments the same day: it’s free, easy and without obligation.