Head of Macro Analysis
Summary: A look at the BoE's response to the pandemic and the market reaction.
Beginning of February: First confirmed COVID cases in the United Kingdom.
March 11: The Bank of England decides to cut interest rate from 0.75% to 0.25% and to launch a term-funding scheme to support SMEs that can provide in excess of £100bn.
March 19: New interest rate cut to an historical low level of 0.10%. At the same time, the BoE steps in further by increasing U.K government bond purchases up to £200bn (with total QE program reaching £645bn).
April 9: The BoE implements temporary monetary financing of the government to fund the immediate cost of fighting the coronavirus without having to tap the gilts market (via the government’s bank account at the central bank, known as the “Ways and Means Facility”). The amount allocated to this new scheme is undisclosed.
June 18: As widely expected, the Bank of England beefs up the QE asset purchase program by £100bn – at the lower end of expectations - to a total of about £745bn. At constant path, the current program would have been exhausted in July. In addition, the main interest rate is maintained at 0.10%. The overarching message remains ultra-accommodative with indications of further measures to come to stimulate growth in H2 this year.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
