Yesterday’s financial market funfair saw lots of two-way price action mixed with some significant developments on the central bank front. Stocks markets were moderately lifted while foreign exchange saw a broadly weaker US dollar.
Given recent fluctuations, yesterday’s moves were tame – more on a teacup ride level rather than a rollercoaster! Nevertheless, price swings were seen; sadly nothing at present provides reassurance that volatility is set to fall any time soon.
On the central bank front, the Bank of England took the spotlight yesterday, taking further emergency action before their meeting next week. The Bank decreased interest rates to a new record low of 0.10% and additionally announced an increase in its asset purchase facility of £200-billion. Essentially, the BoE will once again be embarking on quantitative easing to ensure interest rates remain low and supporting the government in borrowing cheaply. The Bank’s accompanying statement justified their action with, “Over recent days, and in common with a number of other advanced economy bond markets, conditions in the U.K. gilt market have deteriorated as investors have sought shorter-dated instruments that are closer substitutes for highly liquid central bank reserves. As a consequence, U.K. and global financial conditions have tightened.” Sterling actually gained on the back of the announcement, the policy change provides certainty and should ensure UK financial markets operate efficiently and effectively.
The economic calendar in the G10 space is exceptionally light today. The majority of focus, across various markets, will be on how participants react heading into another weekend which will likely be full of market-moving headlines. Recently, investors have chosen not to hold risk into the weekend which has produced wild price swings as the week draws to a close. Will today be any different?
Enjoy the weekend. Stay safe!
8:22am, March 20th 2020
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