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Bank Of England Steals The Show

By Capital.com (David Jones)Market OverviewDec 17, 2021 05:09AM ET
www.investing.com/analysis/bank-of-england-steals-the-show-200611920
Bank Of England Steals The Show
By Capital.com (David Jones)   |  Dec 17, 2021 05:09AM ET
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Although a lot of people have one eye on the Christmas holidays this week, there has been plenty for investors to digest over the last few days. There was something of a quiet start to the week with markets marking time until Wednesday’s interest rate decision from the US Federal Reserve.

No changes here - but as usual it was what could be coming down the line that markets were waiting for. The central bank did not disappoint here, signaling that there would be three rate rises in 2022, as an aggressive approach to get inflation under control. This was a shock - but was well-received by stock markets, with the S&P 500 index finishing near its all-time high. Perhaps investors could get their Santa Rally after all.

Not wanting to be outdone on the central bank shock front, the Bank of England went one step further - and actually raised the UK base rate on Thursday. Admittedly this was only by 0.15%, so savers won't be doing ecstatic backflips just yet - but this really wasn’t expected, at least not until January.

Earlier in the week, UK inflation had come in higher than expected at 5.1% for the past year so this may have swayed the Bank's hand. Predictably the currency market was where the reaction was the quickest with the GBP jumping almost 100 points against the US dollar over the next 90 minutes.

But to keep some perspective here, it is only a week ago that GBP/USD hit its worst levels for a year. It still remains to be seen whether this week’s rate rise marks the beginning of the end of the pound’s decline.

The ECB was also up this week on the roster of central bank announcements. No changes here from the Europeans - but it did say it would be scaling back its stimulus program. With it feeling as if central banks have just been happy to keep the money printers running for at least the last 18 months, this week may well go down (in short-term financial history at least) as something of a watershed moment.

It has certainly given investors a lot to think about as the new year gets underway, with a different fiscal backdrop to what they have experienced recently.

Disclaimer: This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of Capital.com or any of its affiliates, subsidiaries, officers, or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Past performance is no guarantee of future results.

Bank Of England Steals The Show
 

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Bank Of England Steals The Show

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