Just like buses – central banks announcements

Posted by on Jul 9, 2012 in Featured, News

Just like buses – central banks announcements

Last week was notable for news affecting the value of major currencies. We waited all week for announcements from central banks and just like buses, three came along at once.

The Bank of England’s announcement to print another £50 billion was anticipated. The markets knew that was going to happen. At the moment of the announcement, a small blip in the value of GBPUSD just confirmed the inevitable.

The European Central Bank then duly obliged with a quarter point cut from 1%. This bit was expected by the market. The Euro went into free fall on the back of the ECB reducing the overnight rate to 0%. Even a lay person looking at a chart for EURUSD around lunchtime on Thursday will see how the Euro fell off the cliff.

The Bank of China was the third bank to change interest rates. It was unscheduled and unexpected as they cut interest rates by just over a quarter of a percentage point. Three arriving at once.

It is these unexpected elements of interest rate policy that give most cause for concern. The ECB with a 0% overnight rate and the Bank of China, needing to stimulate growth in the worlds second largest economy.

With pessimism the order of the day, traders can at least remain optimistic. The more changes that are made, or deemed necessary, the more currencies will move. The more they move, the more trading opportunities there are for us to profit in the market.