As we have moved through this week, it has been a cagey time to say the least, with much negative news in the headlines (so what’s new?) and not much movement in the wider investment markets to report.
As expected, we have seen further job losses, as firms prepare to return to business and to try and assist with this process, the Bank of England has announced a further injection of £100 Billion of funding into the economy by way of quantitative easing (QE). In essence this is a method by which the Bank will buy ‘bonds’ at low rates of interest from Banks and other leading institutions, in order that these institutions can in turn pass this money onto the wider economy. Great in principle, but it needs to be repaid (obviously) and it also relies on these institutions passing it on to the wider public (and not just keeping it to play with themselves!).
The positive with this, is that it shows the Bank of England and UK to have sufficient credit worthiness to carry out such a plan, but the obstacles for the public will inevitably be the credit-worthiness checks required to borrow funds in the face of so much employment uncertainty. For businesses however, it could play out very well in the short term and without doubt is a necessary step in our economic recovery.
As for the effects on our currency, well QE never helps and particularly at a time when we have a sovereign currency and are imminently going it alone. Let’s just hope it hits its intended target and stimulates our economy.
There are a couple of overhanging issues which are clouding investment markets right now; the first being the continuing concerns about a second outbreak of the virus in Beijing and the second being the discussions which are taking place within the EU with regard to their own recovery plans, with the European Central Bank making funds available, as with the Bank Of England here; however, there is an argument ongoing between some of the member nations as to how this is to be distributed, with the Southern nations arguably needing more help than the Northern ones like Austria, Denmark, Sweden and the Netherlands.
It is going to be a testing time for the EU as a body and I just hope that UK don’t end up having any financial backlash from this, with the threat of a ‘no deal’ Brexit outcome being heightened (for better or worse I don’t really know!).
So that’s it really, not much to grab a hold of as such, but plenty of arguing going on. The main thing is that we do appear to be edging forwards in recovery though, even if it does not feel like it when you hear the news every day!