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GBPUSD and AUDUSD: The Bank of England intervenes in monetary policy and lowers rates to almost zero. The RBA begins redemption

The British pound revived slightly and managed to stay at the lows of 1984 after the Bank of England cut its key interest rate at an extraordinary meeting. Discussions about such measures have been going on for a long time, and given the worsening situation in the financial markets, there was no point in waiting for March 26 – that's when the next meeting of the Bank of England was scheduled.

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The regulator lowered the interest rate to 0.1% from 0.25% and announced that it was resuming bond purchases. The decision to reduce the key rate to 0.1% from 0.25% was made unanimously. At the same time, the Bank of England increased the volume of the bond purchase program by 200 billion pounds to 645 billion pounds, following the example of a number of other countries. Such measures are aimed at countering the economic damage caused by the coronavirus pandemic. This week, the regulator has already made quite a few decisions about allocating assistance to companies, employees and households affected by COVID-19. Management also concluded that it would resort to further monetary easing, if necessary, to address problems in financial markets.

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As I have already noted, the Bank of England's actions is not isolated. On Wednesday, the European Central Bank announced the launch of a new bond purchase program with a total value of more than 1 trillion euros, and the US Federal Reserve began actively increasing its bond purchases yesterday.

During his speech, the head of the Bank of England, Andrew Bailey, said that there is currently an emergency situation due to the spread of the virus in the world, but the Central Bank still has enough tools to counter this. Speaking after the emergency meeting, Andrew Bailey said that he does not support negative interest rates, but he did not rule out such a turn of events.

The measures taken by the Bank of England seem to have calmed the market a little. The yield on 10-year UK government bonds fell to 0.751% from 0.915% earlier.

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Yesterday, a number of statements were made from the rating agency Moody's, which did not greatly please traders, although it is clear that for the European continent, the coronavirus outbreak will sharply weaken the economic outlook. Moody's expects that the damage to Europe will be severe, but the overall impact of the virus depends on the duration of the consequences since, before the coronavirus outbreak, consumption in the EU grew steadily due to a good level of employment and a constant increase in wages.

As for the technical picture of the GBPUSD pair, much will depend on how soon the bulls recover from the blow received this week, and on the strength of the support of 1.1470, which resisted a series of attempts to break lower. Bears will actively defend the resistance of 1.1780, and only its breakout will strengthen the demand for the trading instrument, which will return it to the levels of 1.1920 and 1.2020. The lower limit of the current channel can be considered the annual lows of 1.1470, and this, by the way, is the volatility of 300 points, which can keep the pound in this range for a long time. Given that the crisis has not passed, it is best to consider short positions on the pound after significant corrections to major support levels.

AUDUSD

Today, it became known that the Reserve Bank of Australia, following the example of other countries, announced the launch of a quantitative easing program, setting a target yield level for 3-year bonds. The report indicates that the regulator will buy bonds worth 5 billion Australian dollars.

During the speech, the Prime Minister of Australia said that we are working on a package of measures to mitigate the effects of the virus over the next 6 months, and the new measures will include support for people affected by the economic downturn. Let me remind you that the United Kingdom and the United States have already resorted to such options for helping citizens. Morrison also noted that additional support measures will be provided for small and medium-sized companies.

As for the technical picture of the AUDUSD pair, volatility also remains at a very high level and we should not expect that the bulls will be able to quickly compensate for all the decline that has been observed since the beginning of March this year. The next resistance levels are visible in the area and 0.5970 0.6165. In the scenario of another pressure on the trading instrument, support will be viewed in the area of 0.5670 and at the annual minimum in the area of 0.5500.

The material has been provided by InstaForex Company - www.instaforex.com