BoE base rate rise?
Discussion
mikeh501 said:
On a more practical level, can anyone succinctly explain the relationship between inflation, stocks, base rate and currency? What can we take a "truths" from a investing standpoint to help plan our investing.
Traditional economics would indicate that:Rising stock prices (healthy economy) will be accompanied by inflation
Where inflation is deemed excessive, the base rate should be raised to counter this, by discouraging borrowing (personal and corporate)
Higher base rates generally mean a stronger currency (think of a global investor who has £1m to invest between two countries... they'll put the money where they get the greater return)
That is all greatly simplified but is correct in terms of broad theory.
mcbook said:
Higher base rates generally mean a stronger currency (think of a global investor who has £1m to invest between two countries... they'll put the money where they get the greater return)
That is as we would expect, but what happened yesterday ?
The UK base rate rise was anticipated, but still there was an immediate FX movement when the announcement was made, against USD (I don't know about other currencies) in the opposite direction.
Perhaps I have overlooked the obvious, but no complaints anyway, because it boosted the values of my dollar earners.
Can anyone provide an explanation ?
Jon39 said:
That is as we would expect, but what happened yesterday ?
The UK base rate rise was anticipated, but still there was an immediate FX movement when the announcement was made, against USD (I don't know about other currencies) in the opposite direction.
Perhaps I have overlooked the obvious, but no complaints anyway, because it boosted the values of my dollar earners.
Can anyone provide an explanation ?
Carney's comments after the decision indicated that he didn't think the economy was very strong and it wasn't likely that there would be subsequent rate rises, not immediately anyway. This was news to the market as the general consensus was for a rising trend.
Jon39 said:
That is as we would expect, but what happened yesterday ?
The UK base rate rise was anticipated, but still there was an immediate FX movement when the announcement was made, against USD (I don't know about other currencies) in the opposite direction.
Perhaps I have overlooked the obvious, but no complaints anyway, because it boosted the values of my dollar earners.
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mcbook said:
Carney's comments after the decision indicated that he didn't think the economy was very strong and it wasn't likely that there would be subsequent rate rises, not immediately anyway. This was news to the market as the general consensus was for a rising trend.
Thank you Ian.
It makes sense now.
stongle said:
The BOE is going to be the good boyfriend, so expect rates to .75 by 2020 unless an outside event.
Ah, some more years to do extra borrowing then.
I hear there is a new mobile phone, and it 'only' costs £1,000.
That sounds great. Only need it for a year though, because there should be a 'better' one then.
( Reason for being annoyed. Years ago, I noted that Apple were selling a £20 mp3 type music player, for hundreds of pounds. What I failed to realise, was they would keep their party going for such a long time. Anyway, investors should ignore hindsight. )
Any Apple holders from the 1990s on the forum ?
Edited by Jon39 on Friday 3rd November 14:41
Jon39 said:
mcbook said:
Carney's comments after the decision indicated that he didn't think the economy was very strong and it wasn't likely that there would be subsequent rate rises, not immediately anyway. This was news to the market as the general consensus was for a rising trend.
Thank you Ian.
It makes sense now.
In theory, with everything remaining constant, this fast money action will be undone over the coming month or so and you should see the two pairs back to where they were at the start of the week.
Retail investors love to blame the 'algos' these days like they used to blame the market makers but the sell off was a very much program derived event by the speculative funds. We remain now in a rising rate environment for the GBP and lagging the USD but leading the EUR and this hasn't changed which is why you'd generally expect levels to revert and the trend of the last few months to continue.
RizzoTheRat said:
About a 2% drop against the Euro too, bit of a pain when I'm paid in pounds but spending in euros.
It dropped 1.6% yesterday and has regained 0.6% today as yet again Carney gets it wrong on his forecasting for the economy, today's figures released show higher gains than expected with expected quarter growth looking at 0.5%, service sector growth smashed his expectations.http://www.bbc.co.uk/news/business-41856442
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