BoE keeps rates unchanged and sparks concerns

September 16, 2016

The Bank of England holds the key rate unchanged after the meeting as the August rate cut has not yet shown any visible results. The borrowing costs remained at their historically low levelВВ at 0.25%, whilst the asset purchase target (amount of corporate debt bought out by UK government) was held at 435B.

There were no real surprises in the BoE decision as the Bank is yet to gauge the effects of the August easing which will take some time to manifest. Nonetheless, the shares of the financial sector, which investors priced in the expansion of QE, were among the leaders of decrease with Royal Bank of Scotland (RBS:LN)ВВ falling by 1.06%ВВ and Barclays (BARC:LN) by 0.97%. FTSE 100 gains pace due to the weakening of the pound.

The Pound saw the limited impact on the BoE although later the GBP/USD pair navigated to the support at 1.32 level.

TheВВ Gold trims down lossesВВ as the BoE decision to support ECB and Bank of Japan stoked concerns of the Central banks as they may halt the expansion of their easing programs causing a rout from global equities. Futures on Gold for the December delivery traded in green at 1.326,75 as of 12:20 GMT, bouncing from the 1,322.00 sessions low. The bullion is under pressure ahead of the FED decision as there areВВ slim odds of a rate hikeВВ in September.

The Greenback index turned downside on the Advanced Retail Sales report missing forecasts, -0.15% at 95.27. The data showed that sales fell by 0.3% in August missing -0.1% medium projections.

The EUR/USD rose by 0.23%ВВ whileВВ USD/JPY sank by 0.36%ВВ to a 102.21 level. The Swiss Franc strengthened against the US currency by 0.27% as Swiss National Bank policy decision came in line with the forecasts. The Australian Dollar surged by 0.31% despite the lacklustre jobs report.

Crude prices pare declines due to the upbeat change in crude reserves according to the EIA. The CommercialВВ crude oil reserves fell by 0.6M barrels, while gasoline stockpiles showed minor growth by 0.6M barrels. Capacity utilisation rose 92.9% in the week ending on September 9th. WTI and Brent rose 0.71% and 0.96% respectively.

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