Interest rates remain unchanged

Paresh Davdra is the Dealing Director of RationalFX, Currency Specialists. Wednesday 20th May 2015 08:26 EDT

Bank of England (BoE) held Interest Rates at 0.5% for another month. Due to the Election this announcement was delayed, we are now into the sixth consecutive year with interest rates being this low. The Rate has cut return on savings but has benefited mortgage borrowers due to lower repayments.

The BoE left the scale of its quantitative easing (QE) stimulus programme unchanged at £375bn. The Bank of England has recently warned that consumer price inflation could turn negative at some point over the next few months. The reason behind this is due to the fall in the price of oil since last year and the continuing supermarket price war. Should this be the case we should continue to see the record low interest rates continue.

Bank of England governor Mark Carney has suggested he's in favour of the Tories holding an early referendum on Britain's membership to the European Union. Carney said that the planned vote on EU membership should be held "as soon as necessary" in an interview on Thursday. He also stressed the importance of Europe to Britain's economy saying "one of the big advantages this economy has is access to the European market".

The US Federal Reserve said that labor market conditions had worsened for April. The figure cites indicators such as the unemployment rate, payroll employment and measures 19 dimensions of labor market activity, all of which gave a negative outlook.

US retail sales month-on-month coming in at 0%, missing the consensus of 0.2% and a long way from the 0.9% previous. This is now the fifth consecutive miss for US retail sales, and has also pushed the USD index lower to the tune of 0.7% to a 3 month low.

Fewer Americans than forecast filed applications for unemployment benefits last week, pushing the average over the past month to the lowest level in 15 years and underscoring labour-market strength. Jobless claims decreased by 1,000 to 264,000 in the seven days ended May 9.

Federal Reserve Chair Janet Yellen and her colleagues are monitoring the labour market while also looking for signs of inflation as they consider the appropriate time to raise their benchmark interest rate from near zero.

The Euro strengthened across the board after Greece made "progress" on its debt obligations, transferring €750m in debt interest to the IMF - a day ahead of a payment deadline earlier last week, but news soon emerged that the payment had been made using a loan they already owed on.

Greece's finance minister said the country's financial situation is "terribly urgent" and the crisis could come to a head in a couple of weeks. Yanis Varoufakis gave the warning after Eurozone finance ministers met in Brussels to discuss the final €7.2bn tranche of Greece's €240bn EU/IMF bailout. Greece has until the end of June to reach a reform deal with its international creditors as its finances are running so low that it has had to ask public bodies for help.

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