FTSE 100 on the rise as BoE remains steady

The Bank of England remained predictably patient in the face of Brexit uncertainty. Meanwhile, Fed action looks likely to be limited despite rate cut.

• Central banks dominate as markets move higher
• BoE continue to await Brexit resolution
• Fed under pressure, yet monetary policy unlikely to reverse trade war effects

European stocks are closing out the day in positive fashion, following on from a 24-hour period which saw the Fed, BoJ, SNB, Norges Bank, and BoE all release their latest interest rate decisions. With UK retail sales data released alongside a Bank of England rate decision, sterling volatility was always likely to be on the cards. While we haven’t seen huge moves for the pound, an afternoon rebound for GBPUSD does highlight that markets continue to believe there is reason to believe the next move may be a rate rise. In essence, the BoE will only act once the Brexit uncertainty has been lifted, and thus it is a case of whether a no-deal brexit occurs or not. A no-deal Brexit would certainly ramp up the likeliness of a BoE cut, and thus the rise in the p ound seen in recent weeks has been a reflection of growing confidence that such a disorderly exit can be averted.

For all the hype around a huge round of easing globally, yesterday’s Fed meeting put the dampeners on the likes of gold which had surged higher in anticipation of a long currency war. Despite Trump’s wishes, the Fed looks unlikely to embark of a prolonged period of easing unless the economic picture deteriorates heavily. The US remains an outperformer on the global stage, and while this trade war has proven anything but easy to win, Trump was right that the US would suffer less than those who rely on huge US imports for growth. Ultimately for all the talk of fiscal and monetary expansion being required, what is needed is a trade war resolution to spark increased trade, confidence and  investment.