How Did Global Markets React to the BOE’s Monetary Policy?
Sharp fall in the pound
The pound-US dollar currency pair saw a sharp fall after the monetary policy release on August 4, 2016. The pound fell by nearly 1.5% after the release. The fall was primarily attributed to the lowering of the interest rates and the increase of the asset purchase program. This would increase the supply of the pound in the market. In turn, it would reduce the value of the pound.
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The euro remained relatively strong, despite the pound’s strong fall. The euro fell to 1.1120 levels after the BOE’s release. It bounced back to 1.1140 shortly afterwards.
Rise in global markets led by FTSE 100
European indexes were trading with a strong positive bias on August 4, 2016, after the BOE’s monetary policy release. The rise was led by the United Kingdom’s markets. The FTSE 100 rose by a notable 1.6% as of 12:00 AM EST.
Looking at the other major indexes, the German (EWG) DAX rose by 0.57%, while the French CAC 40 rose by 0.58% as of 12:00 AM EST. The Russian (RSX) and Turkish indexes were among the other major leaders. The Russian MICEX rose by 1.3%, while the Turkish BIST rose by 2.1%.
Among other major European indexes, the Euro STOXX 50 (FEZ)—a Eurozone blue-chip stock index—rose by 0.59%.
Impact on the global ETFs
Looking at the performance of global ETFs on August 4 at 12:00 AM EST, the SPDR S&P 500 ETF (SPY) rose by 0.18%. Among other major ETFs, the iShares MSCI EAFE ETF (EFA) and the Vanguard Total Stock Market ETF (VTI) rose by 0.57% and 0.21%, respectively.
The rise was more compounded in emerging market ETFs. The Vanguard FTSE Emerging Markets ETF (VWO) rose by 0.83% at 12:30 AM EST.