The Bank of England announced on Thursday the decision to cut interest rates to near nothing, unleashing billions of pounds into the economy, citing the weaker economic outlook after the shock Brexit vote. It was down 1.5 percent at $1.3126 by late afternoon in London, while stock markets rose, as the weaker currency will help numerous country’s multinationals and exporters earn more money overseas.
Advertisement
OVERSEAS: Britain’s FTSE 100 rose 1 percent.
The Pound has fallen by roughly 1% against the Euro and the U.S Dollar this lunchtime after the Bank of England announced a cut in United Kingdom interest rates to a new record low of 0.25%.
Currency dealers were uncertain how sterling would react to a rate cut, as it has been largely factored in and the scale of sterling’s declines since the Brexit vote could limit the immediate downside.
The rate cut was widely expected, with markets pricing an nearly 100% chance of the cut happening, but the extension of bond buying, while not massively shocking, was not as widely expected.
“But the real issue is whether they cut by 50 basis points and give a strong indication of quantitative easing in the September meeting”. The latest purchasing managers’ surveys for Britain’s manufacturing, construction and services sectors showed that economic activity slumped to the lowest since 2009, at the height of the global financial crisis and pointed to a 0.4% contraction in the third quarter according to IHS Markit, which compiled the data. The MPC also announced that the asset purchase facility would be increased by £60bn to £435bn and the bank would also commit to bond purchases of up to £10bn.
The pound, which has slumped to 31-year lows in the wake of the European Union referendum outcome, dropped 1.4% to US$1.31 following the rate decision.
Technology companies continued to make the biggest gains and oil prices rose for the second day in a row.
Brent crude futures rose 0.7 percent on Thursday to $43.38 per barrel, extending its recovery from Monday’s four-month low of $41.41.
Benchmark US crude rose 1.10 dollars (83p), or 2.7%, to 41.93 dollars (£31.99) a barrel in NY after a 3% climb on Wednesday.
KEEPING SCORE: The Dow Jones industrial average lost 17 points, or 0.1 percent, to 18,337 as of 10 a.m. Japan’s Nikkei 225 finished 1.1 percent higher. The dollar was little changed at 101.12 yen and the euro was at $1.1147.
“The economic climate has clearly darkened as Markit PMIs and the Bank of England’s own forecasts demonstrate, but people should remember that monetary policy is only one side of the coin”. However, it is not meant to offer a specific direction for future monetary policy, he said. The Standard & Poor’s 500 index rose 3 points, or 0.2 percent, to 2,166. Callaway surged 64 cents, or 6 percent, to $11.22. Australia’s S&P/ASX 200 Index climbed 0.4 percent.
MSCI’s world stocks index, which tracks shares in 45 nations, was up 0.34 percent.
“Now what the Fed will tell you is that the economics in the USA are different and that we’ve had generally stronger growth, generally lower unemployment”.
Soft second-quarter U.S. GDP data and some other mixed data have dented the dollar as they reduced expectations that the Federal Reserve will raise rates this year.
The bank cut its projections for growth by over half, down to 0.8 percent from 2.3 percent, reports The Telegraph.
Advertisement
This post was syndicated from pulse.ng – Nigeria’s entertainment & lifestyle platform online.
