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Friday, March 29, 2024

UK Rate Cut Coming, No Hikes Expected for 5 Years: Osborne Stupidity Revisited

Courtesy of Mish.

Not only did the British pound plunge in the wake of Brexit, so have UK interest rates.

Traditional theory says central banks need to raise interest rates to stop a sinking currency. Russia is a good example of a country recently hiking rates to support the ruble.

Now, the market expects a rate cut from the Bank of England.

UK 30-Year Bond Yield Since 2003

UK 30-Year 2016-06-27

British Pound vs. US Dollar Since 2003

Pound 2016-06-27

Some newcomers may be wondering why up sometimes means lower and down sometimes means lower. It all depends on which currency is first. Note the chart says GBP/USD. Had it said USD/GBP up would have meant down.

I go with traditional currency trading pair nomenclature. Others invert the relationship so down looks down. In this case there is no need to invert anything. Down is lower.


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