In the week following the decision on the interest rates of the European Central Bank, another important meeting comes from Bank of England’s Mark Carney.
The Bank of England has decided not to touch either interest rates or Quantitative Easing. As expected by most analysts, interest rates remained at 0,25%, the lowest rate level from the summer of 2016, when BoE chose to cut the cost of money from 0,50% to 0,25%. The Quantitative Easing program was confirmed at £435 billion.
However, the attention of the traders was captured by the internal divisions within the Bank of England’s Monetary Policy Committee: 7 members were favorable to the status quo, 2 members were likely to the rise of interest rates.
The sterling reacted immediately and, after the weakness of Bank of England’s pre-decision, it rebounded on the minutes that a reduction in stimuli will come in the coming months.
The sterling gained ground mainly on the EUR / GBP exchange rate, which fell more than 1% after the unchanged interest rate announcement. The reaction of the markets was of a strong support for the English currency.
Equally important during this week was the market mover on American inflation, to observe how much this economic power is approaching to the pre-set target.
US August inflation has surprised analysts’ expectations: on a monthly basis, it rose by 0,4%, deviating from the consensus at 0,3% and from the previous survey at + 0,1%, while on an annual inflation, on the other hand, fell by 1,9%, both from July 1,7% and from analysts’ forecasts to 1,8%.
The US Consumer Price Index has marked + 0,2% on a monthly basis and + 1,7% on an annual basis, against the respective forecasts at + 0,2% and +1,6%.
In addition to inflation, also the data on unemployment claims improved in the United States. The claims dropped to 284.000 units, against market forecasts for a rise of 300.000 units and falling from the disappointing 298.000 of the previous week. Continued claims amounted to 1.944 million, against the expected 1.985 million.
In the meantime, the bullish trend of the EUR/USD exchange rate seems to have slightly faded and this has allowed many to question about the future of the couple.
Some experts say the greenback has touched the bottom and therefore will continue to gain ground. All of this could affect the euro-dollar exchange rate, yet strengthening the US currency may also reflect a speculative appreciation of the euro.
Plus, the dollar index, which tracks the US currency’s performance against a basket of six other currencies, collapsed at the minimum of more than two years in the session last Friday. Investors’ concerns were about the short-term impact of Hurricane Irma and tensions in North Korea.
After the launch of the new missile by Kim Jong-Un, the yen has also come back under the market’s magnifying glass.
From a logical point of view, the yen would have been depreciated as a currency of a nation that was threatened to be razed to the ground. But this did not happen. The yen, after all, is still the most famous among the refuge currencies. It is also worth noting that Japan has a higher import export, so its currency is highly demanded.
At the launch of the last missile by Pyongyang on Friday, the yen first rose to lose ground after against euro, dollar and pound.
Also for the cryptocurrencies, the situation is not very rosy: either Bitcoin and Ethereum are beaten down. The key reason is to come to the ever closer Chinese confirmation of the block of virtual currency transactions.