- Bank of England cuts base rate hard and fast and the markets like it
- European Central Bank to discuss further money supply measures today
The overnight news is largely a tale of two central banks. The Bank of England has been seen as acting decisively and swiftly by making another cut in the UK leaving the base rate at just 0.1%; citing the need to get ahead of the economic contagion caused by the viral contagion. The word, ‘unprecedented’ is overused but this truly is unprecedented.
How are the markets reacting to Bank of England’s base rate cut?
The markets clearly like the positive response because, where lower base rates tend to weaken the underlying currency in ‘normal times’, this time the move saw Sterling recover some of the ground it has lost over the last few days.
I feel sure the Prime Minister’s assurance that London would not be closed for business (‘locked down’ to use the press’s favourite expression these days) will have helped.
ECB considering money supply measures as base rate already at zero
Across the channel, the European Central Bank (ECB) is being widely criticised for being laggardly, indecisive and behind the curve. Whilst the ECB was already at zero base rate and are therefore unable to do much with that to push the economy, they have been noticeably quiet when it comes to further or more unusual action to keep the economic wheels turning and yet some parts of Europe are possibly a month ahead of the UK in terms of the virus. We hear this morning that Christine Lagarde, the ECB President, will be discussing asset purchase programs today. Euro traders will watch with interest.
You may also find interesting:
- Bank of England Makes 0.5% Emergency Interest Rates Cut
- Rate cuts all around the world as Coronavirus isn’t stopping
- Another Federal Reserve rate cut sends panic around the markets
Which other central banks cut their base rate?
Here is an updated list of all central banks that delivered a base rate cut in the last weeks
|Central Bank||Country||Current rate||Previous rate||Last change|
|Bank of England||England||0.1%||0.25%||19/03/2020|
|Reserve Bank of Australia||Australia||0.25%||0.5%||19/03/2020|
|Federal Reserve||United States||0.25%||1.25%||16/03/2020|
|Reserve Bank of New Zealand||New Zealand||0.25%||1%||16/03/2020|
|Hong Kong Monetary Authority||Hong Kong – China||0.86%||1.5%||16/03/2020|
|Bank of Korea||South Korea||0.75%||1.25%||16/03/2020|
|Bank of Canada||Canada||0.75%||1.25%||13/03/2020|
|National Bank of Moldova||Moldova||4.5%||5.5%||04/03/2020|
|Saudi Arabian Monetary Authority||Saudi Arabia||1.75%||2.25%||03/03/2020|
|Central Bank of Malaysia||Malaysia||2.5%||2.75%||03/03/2020|
Updated on 20/03/20 at 09:58
What is the focus of the day?
Today’s economic data
Besides the news about base rates decisions from central banks, there is really very little data due this morning but the afternoon will be busier with Canadian retail sales and US housing market data to entertain us. Sadly, as we all know, that won’t impact much at all because the response to the virus is the main – and perhaps only – talking point right now.
Chancellor funding package
We will get more detail on the Chancellor’s funding package today; who will be supported and how that support will operate. Whilst the £330 billion for business loan support looks great on paper, who on earth is getting into extra debt right now?
Sterling value after further base rate cut
So after the Bank of England delivered another base rate cut, Sterling starts the day just below €1.10 and around $1.1860. These are markedly higher than the lows we saw yesterday. Where it will be when the day and the week end is anybody’s guess and it all depends on central banks, base rate decisions and politicians. Gawd ‘elp us guvna.
Have a good, safe and healthy weekend everyone.
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