Market Overview

7 May 2021

Bank of England Made an American Checkers’ Style Move

Major world central banks are seen to be playing the suicide checkers game in an attempt to keep their ultra-lose monetary policy as long as possible to provide stimulus for national economies that are on their way to a recovery from the pandemic. So, the first central bank to sketch a framework towards tightening its monetary policy may lose or win regarding the pace of pandemic relief, mass vaccination and rising business activity.

The Federal Reserve (Fed) and European central bank are keeping their record low interest rates along with other stimulus measures launched a year ago as the pandemic locked down the global economy. On the contrary, the Bank of Canada lowered its purchases of government debt by a quarter. So, the Bank of England (BoE) could face rising loans interest rates for the budget and the strengthening of the Pound if the BoE even alludes to a tighter monetary policy framework. This move could lower competitive advantages of the British economy. But the situation for the central bankers today are more reminiscent of American checkers as the Fed has a strong hand to set up the rules in this suicide game. So, it seems that the central banks are not willing to take on the role of a strong or tough character. The strength now is in a deliberate weakness. So, the BoE gave contradictive messages in its statement on Thursday as it left its monetary policy unchanged. The BoE highlighted that the British economy is growing faster than expected with GDP forecast up to 7.5% in 2021 vs 5% expected in February. The vaccination process is speeding up with a faster pace than was expected earlier making the United Kingdom among the leaders in this vaccination run. British Production PMI rose to 60.9 points, the strongest reading in 89 months.

So, logically it would be wise to expect that the BoE would move faster towards tighter monetary policy than was earlier expected and should now provide the framework, or at least a timeline, for such action. But the BoE failed to meet such expectations on Thursday, leaving the forecast of a possible interest rate hike to 0.1% by the second quarter of 2023. The BoE also reconfirmed purchases of government debt at 875 billion Pounds.

Investors were confused when trying to read the BoE’s controversial signals. Some found positive messages of brighter economic perspectives, while others saw the negative side of keeping seemingly excessive stimulus measures. This confusion resulted in high volatility of the Pound on Thursday within the 1.38500-1.39400 range. But, eventually, the Cable was still moving within this range, even though it is gravitating more towards the upper margin of it.

So, the BoE seems to be playing this suicide checkers game while taking a back seat leaving the Fed to take the driving seat, all according to the rules of British Draughts.



Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Lysakov Sergey
Market Focus
Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.
Open Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade Europe to contact me about the information I have selected.

© 2011-2023 Top Markets Solutions Ltd

This website is operated by Top Markets Solutions Ltd which is registered with the Department of Registrar of Companies and Intellectual Property of the Companies of the Republic of Cyprus as a private limited company with registration number HE272810 and is authorized by the Cyprus Securities and Exchange Commission ("CySEC") to act as a licensed Cyprus Investment Firm ("CIF") with license number 158/11. Top Markets Solutions Ltd operates in accordance with Markets in Financial Instruments Directive (MiFID).

In accordance with CySEC Circular C108, please be informed that the previous name of Top Markets Solutions Ltd was TeleTrade-DJ International Consulting Ltd.

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Top Markets Solutions Ltd ("the Company") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall the Company have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

The Company cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

The Company currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime. The Company does not provide its services to residents or nationals of the USA.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, The Company uses cookies in its web services. By continuing to browse this site you agree to our use of cookies.

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63.37% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade Europe strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63.37% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Choose your language/location