Laissez Faire: Forex Trading Update, 8th March
Vantage FX (http://www.vantagefx.co.uk/) provides a daily overview of the news activityand announcements currently shaping currency movements across the world. Jay Mawji, the companys head of market analysis, takes a look at news surrounding The Monetary Policy Committee and the Bank of England on 8th March 2012.
On a day when the Bank of England and the European Central Bank could do so much, they chose to do so little. Laissez Faire seems to be the way forward.
The Monetary Policy Committee and the Bank of England today made their monthly decision on interest rates and Quantitative Easing in the UK. The decision was somewhat expected; interest rates are to stay on hold and the Bank of England is likely to refrain from further Quantitative Easing. With inflation set to fall through the year if energy prices remain in control, it is unlikely that the Bank of England will raise interest rates. Analysts arent expecting to see interest rates increase through 2012 and possibly not until 2014. QE now stands at 325bn, with the Bank of England looking to steer the UK economy away from another recession. Mervyn King expects a zig-zag recovery through the year and early data this year supports his view. There is hope in the UK economy, but there is fear. The main concerns right now are centred on the rate of unemployment and the increasing mortgage rates which were the early warning signals of the start of the current recession.
The European Central Bank announced today that it was to take a step back in the handling of the economy (unless there was an immediate recessionary threat) and let the economy heal itself. Interest rates now appear on hold much to the surprise of analysts who were expecting to see a further cut in Eurozone interest rates as a method to spur on growth. The ECB had recently undertaken phase 2 of the LTRO or cheap money project, pumping money into the market by lending it to banks at a severely discounted price. There have been good signs in the Eurozone economy, although the prospect for growth is still dim. The ECB feels that it has done enough to set the Eurozone economy on the right road but it will not be nudging the economy along. The ECB will be looking at reforms and policy advances from Governments and the private sector to will the economy towards a recovery.
Some things are best left alone but many are not convinced that our economies dont need babysitting.
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by: Vantage FX UK