Random ramblings about some random stuff, and things; but more stuff than things -- all in a mesmerizing and kaleidoscopic soapbox-like flow of words.
The Bank of England (BoE) has slashed interest rates by another 50 points today, leaving the current rate at 1%. This measure is to tackle stimulate the economy at a moment where there is more worry about deflation than inflation. Also today, the European Central Bank (ECB) has decided to keep interest rates at 2%. Even though one would expect the British currency to fall spectacularly against the Euro given these two decisions by the central banks, this hasn't happened. In fact, the British pound hitted bottom 5 weeks ago, and since then it's been pretty obvious than the BoE was more prone to further slashes than the ECB. How is this explained?
Well, in my opinion, the BoE is trying to be more proactive in stimulating the economy than the ECB. This seemed costly 2 months ago, when the pound seemed to be going down the pipe, but now it's recovering. The same can be said for the Federal Reserve in the US, an organ that has been even more aggressive than the BoE and the ECB. The US dollar has already recovered *a lot* of ground to the Euro and the British pound. So with the current situation, one can only predict that both the US dollar and the British pound will gain turf against the Euro in the next few months.
If I am wrong, time will prove me wrong :-p