Is the UK’s BoE the latest to join the global currency wars?

Britain is synonymous among investors as being home to a three-pronged financial markets ecomomy.

On one hand, the nation hosts London’s global financial sector, which is the largest in the world, and responsible for the majority of interbank FX order flow which is handled by the global giants based in the Square Mile, whereas its domestic population is largely concerned about the depth of the recession that the nation entered following the 2008/2009 financial crisis.

Thirdly, Britain has held onto its strong, sovereign currency, the Pound, despite being a prominent member state of the European Union.

This trichotomy has punctuated London’s standing as perhaps a separate economy to the rest of the country, a matter which LeapRate has reported on in detail recently, however in these days of Euro turmoil, it could be that the Bank of England is not simply about to acquiesce or rest on its laurels in the hope that the Pound will be the savior of the economy should the Euro continue to fall, especially at a time when parity with the US dollar is almost upon us.

There has been great discussion about ‘currency wars’ in recent weeks, and thus Saxo Capital Markets Senior Market Analyst Nick Beecroft has drawn an interesting point to the attention of investors.

“The Bank of England Monetary Policy Committee’s minutes reveal a committee that is increasingly concerned about sterling’s strength and the possible implications for trade and inflation, and hence inflation expectations and wage growth” stated Mr. Beecroft today.

“UK base rates are going nowhere until we see concrete evidence of more robust growth in earnings-with a rise in rates probably a 2016 story, it appears the Bank of England is joining the currency wars and this all paints a grim picture for sterling vs the US dollar and I expect an imminent visit of 1.40, with 1.30 a realistic target for end Q2” he concluded.

Photograph: Nick Beecroft, Senior Analyst, Saxo Capital Markets

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