Jump to content

Bank of England Increases UK Interest Rate, GBP/USD Jumps


Recommended Posts

BANK OF ENGLAND, GBP PRICE, NEWS AND ANALYSIS:

  • The Bank of England’s monetary policy committee has voted by eight votes to one to increase UK Bank Rate to 0.25% from 0.1%.
  • The initial reaction to the news was a jump in GBP/USD as the markets were undecided beforehand whether the MPC would raise rates or leave them unchanged.
image.png

GBP/USD JUMPS AS BAND OF ENGLAND RAISES UK INTEREST RATE

GBP/USD has strengthened after the Bank of England’s monetary policy committee voted by eight votes to one to increase UK Bank Rate to 0.25% from 0.1%. The markets had seen the decision as being in the balance as the MPC weighed up surging UK inflation on the one hand and fears of an economic slowdown caused by the rapid spread of the Omicron coronavirus variant on the other.

There was a majority of 9-0 to maintain the amount of quantitative easing at £895 billion.

GBP/USD PRICE CHART, FIVE-MINUTE TIMEFRAME (DECEMBER 16, 2021)

Latest GBP/USD price chart

Source: IG (You can click on it for a larger image)

 

MPC DILEMMA

The dilemma faced by the MPC ahead of its decision was whether a tightening of monetary policy was needed after news that UK inflation jumped in November to a decade-high 5.1%, more than twice the 2% target, or whether it should leave rates on hold because of fears about weak economic growth.

Adding to the uncertainty, there was little guidance in advance from the BoE to the markets after it surprised them by leaving rates unchanged at its previous meeting.

DISAPPOINTING UK PMIS

Ahead of the latest BoE decision, data from Markit/CIPS showed that the “flash” December composite UK purchasing managers’ index was down sharply to 53.2 from 57.6 in November, well below the consensus forecast of a dip to 56.4. The services sector of the UK economy was especially weak as the spread of the Omicron coronavirus variant hit hotels, restaurants, travel and transport.

UK PMIs

Source: DailyFX calendar

Looking ahead, a by-election in North Shropshire to vote on a new Member of Parliament for the area takes place Thursday, with the result due early Friday. Normally, this would have no impact on the markets but the by-election is being seen as a referendum on Prime Minister Boris Johnson’s leadership so if his Conservative Party loses the seat it could have an adverse effect on Sterling assets as it would highlight the current political instability in the UK.

 

Written by Martin Essex, Analyst, 16th December 2021. DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      22,977
    • Total Posts
      95,285
    • Total Members
      43,585
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Sucan1996
    Joined 21/09/23 20:54
  • Posts

    • Stock market analysis and trading strategies: NASDAQ,QQQ, Apple (AAPL),Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA), Microsoft MSFT, Meta Platforms, Netflix (NFLX), Alphabet GOOGL  Stock Market Summary: Further downside to complete the Wave c) of 4 correction (Indices) There are two different patterns for stocks, the stocks that have just topped like Alphabet, Amazon, Berkshire Hathaway are in their Wave a) of 4 and the other stocks are in the Wave c) of 4, that said Apple is slightly different, but can be tied into the Wave c) of 4 patterns. Trading Strategies: Short side Video Chapter 00:00  NASDAQ 100 (NDX) / QQQ / Berkshire Hathaway 06:27 Apple (AAPL) 07:34 Amazon (AMZN) 08:54 NVIDIA (NVDA) 10:08 Meta Platforms (META) 14:07 Netflix (NFLX)  15:37 Alphabet (GOOGL) 17:26 Microsoft MSFT 21:27 Tesla (TSLA) 24:45 End Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge.com     
    • The "best" percentage of your investment portfolio to allocate to cryptocurrencies depends on your individual financial situation, risk tolerance, investment goals, and time horizon. There is no one-size-fits-all answer to this question, as what's appropriate for one person may not be suitable for another. Here are some considerations to help you determine the right percentage for your situation: Risk Tolerance: Cryptocurrencies are known for their price volatility. Consider how comfortable you are with the possibility of significant price fluctuations. Generally, if you have a lower risk tolerance, you may allocate a smaller percentage to cryptocurrencies. Financial Goals: Your investment goals play a crucial role in determining your crypto allocation. Are you investing for short-term gains, long-term growth, or a specific financial milestone (e.g., retirement)? The time horizon for your goals can influence your crypto allocation. Diversification: Diversification is a risk management strategy that involves spreading your investments across different asset classes. Diversifying your portfolio can help reduce risk. Experts often recommend not putting all your funds into a single investment, including cryptocurrencies. The specific percentage you allocate to crypto should consider the diversity of your overall portfolio. Knowledge and Research: Your understanding of cryptocurrencies matters. If you're well-versed in the crypto space and have confidence in your ability to evaluate and manage crypto investments, you might allocate a higher percentage. However, if you're new to cryptocurrencies, it's wise to start with a smaller allocation until you gain more experience. Financial Situation: Consider your current financial situation, including your income, expenses, and existing investments. Ensure that you have an emergency fund and meet your other financial obligations before allocating a significant portion to cryptocurrencies. Regulatory and Tax Considerations: Be aware of the regulatory and tax implications of cryptocurrency investments in your jurisdiction. Tax laws regarding cryptocurrencies can vary significantly, and it's essential to comply with them. Asset Allocation Strategy: Many financial experts recommend following a structured asset allocation strategy based on your risk tolerance and investment goals. This strategy might suggest a certain percentage for different asset classes, including stocks, bonds, real estate, and cryptocurrencies. Regular Review: Periodically review and rebalance your portfolio to ensure it aligns with your goals and risk tolerance. Cryptocurrency prices can change rapidly, so your allocation may need adjustments over time. Ultimately, there is no universally "best" percentage to invest in cryptocurrencies. It's a highly individual decision that should be made based on your unique circumstances and objectives. It's also important to conduct thorough research and consider seeking advice from a financial advisor or investment professional before making any significant changes to your investment portfolio.
    • Can orsted shares be purchased on the platform?
×
×
  • Create New...
us