BOE Cuts Rates, the Pound Drops, while US Treasuries Rally

BOE Cuts Rates, the Pound Drops, while US Treasuries Rally

The Bank of England (BOE) dropped its benchmark rate to record low 0.25%​ today, causing treasuries to rally along with global bonds, while the pound slid against its major peers after the BOE cut the key lending rate for the first time in more than seven years.   

Image from iStock

The BOE cut growth forecasts by the most ever as policy makers unveiled a stimulus package aimed at containing the fallout from the UK’s secession vote. It is also injecting an additional 60 billion pounds, or $79 billion, into the economy through a bond-buying plan, and it will buy up to 10 billion pounds in British corporate bonds. The measures over all seemed to be more than most analysts had expected, causing stocks to rise and the pound to drop.

While the pound retreated, assets from the dollar to equities showed little reaction to the widely expected move, with investors turning attention to Friday’s report expected to show continued improvement in the US labor market. Sovereign debt from the UK to Germany and America advanced after the BOE delivered its “exceptional” stimulus package to stave off the effects of Brexit. Sterling dropped the most in three weeks, while credit markets strengthened.

In the US, the S&P 500 churned about 1% below an all-time high, while the dollar was confined to its narrowest band in more than a week. Crude rose past $41 a barrel, extending rebound from near four-month lows. The Dow Jones industrial  fell 0.08%, and the S&P 500 rose 0.01%. The Nasdaq composite gained 0.17%.

Applications for unemployment aid rose to 269K, a level close to historical lows and a positive sign for the job market. The pace of hiring and economic growth slowed in the first half of the year, but consumers may increase spending in the months to come.
The FTSE 100 in Britain rose 1.6% after trading flat before the central bank’s announcement. In Germany, the DAX was up 0.6%, and in France, the CAC 40 also gained 0.6%.
The price of oil continued to rebound. Benchmark crude rose 69 cents, or 1.7%, to $41.52 a barrel in New York. It rose more than 3% on Wednesday, and it has been almost two weeks since oil prices rose two days in a row. Brent crude, which is used to price international oil, added 45 cents, or 1%, to $43.55.


This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.