The Bank of England failed to surprise markets after announcing a further injection of £50 billion through its quantitative easing programme. This fell in line with expectations and takes the total sum of stimulus to £375 billion. Europe took a different path in an attempt to boost their economy by cutting interest rates from one per cent to 0.75 per cent which is a record low for the euro area. The single currency was hit particularly hard by the news and weakened against most of its major rivals.

Sterling

Sterling suffered against its US counterpart after the Bank of England decided to increase quantitative easing by £50 billion and decided to leave interest rates on hold. The latest increase in stimulus has taken the total to £375 billion. The MPC warned that “UK output has barely grown for a year and a half and it’s estimated to have fallen in both of the past two quarters”. The news saw markets flow into the safe haven dollar as appetite for sterling suffered.

US dollar

The dollar was the main benefactor as central banks around the world took policy easing action. The Bank of England’s additional QE boost coupled with the ECB rate decision helped flows back into the safe haven greenback. Elsewhere, the Chinese central bank has cut its benchmark interest rates for the second time in two months in a bid to arrest slowing economic growth, providing more evidence of a global slowdown and benefitting safe haven assets in turn.

Euro

Despite a pick up in German industrial data and a successful Irish bond auction, the single currency fell against a basket of its counterparts. As the European Central Bank cut its interest rates to a new low of 0.75 per cent, a move mostly expected by markets, a dovish speech followed from Mario Draghi pushing investors out of the single currency. Mr Draghi confirmed that risks to the European economy were tilted to the downside which helped send flows back into safe haven assets.

Japanese yen

Japanese policymakers warned markets that they would be prepared to intervene if the yen continues to strengthen. Japan relies hugely on exports and does not want this sector to be jeopardised by the strength of its currency. The Bank of Japan is set to meet to discuss monetary policy but no drastic measures are expected for now.

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