Lowering British Interest Rates: What to Expect

Daily Forex Fundamentals | Written by FOREXYARD | Feb 04 09 10:32 GMT |

Over the past 6 months the developed countries, from the West to the Far East, have substantially cut short-term interest rates in order to stimulate their economies. Since October, the British Official Bank Rate has been cut from a high of 4.50% back in October, to 1.5% in January, making this the lowest rate in the Bank of England's (BoE) history. The most significant economic news releases that analysts are focusing their attention on this week are the scheduled decisions by the BoE and ECB on Thursday at around 12:00 GMT on whether or not to cut these rates even further. Here is ForexYard's analysis as to the impact these decisions will carry on the GBP and how forex traders can benefit from the impending price movements. Read the previous article to see the impact which the ECB rate cut will have on the EUR. GBP - BoE Official Bank Rate Decision and its Impact Prior to the commencement of 2009, it seemed that Britain's economy was in much worse condition than that of the Euro-Zone. However, recent developments have revealed this not to be the case. The dire situation in Britain is also matched by that in places such as the Euro-Zone, China, Japan, and the United States. Most analysts predict that Britain will cut her Interest Rates by an additional 50 basis points to 1% this Thursday. Such a move would not be taken by the BoE unless it was pre-determined that it would instill strength back into the British economy. Typically a rate reduction weakens the national currency; however, lately these reductions have performed the necessary function of putting some confidence back into the market. As we have seen with the U.S., Canadian, and Japanese economies, rate cuts these days have produced a rally to the currency directly affected, contrary to the usual effect. Many experts agree that this may in fact be the case with the GBP. We could see a strong appreciation of the Cable up towards levels of 1.4550 if the BoE does indeed cut its rate. Forex traders should take advantage of this information by entering their long positions before the rate cut is announced and capturing profits from the price swing which may result. FOREXYARD Disclaimer: Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This and any analysis published or received from FOREXYARD is for informational use. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in the analyses. While we try to ensure that all of the information provided is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. FOREXYARD will not be held responsible for the reliability or accuracy of the information available. The content herein is provided in good faith and believed to be accurate; however, there are no explicit or implicit warranties of accuracy or timeliness made FOREXYARD or its affiliates. The reader agrees not to hold FOREXYARD or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.