Following the news that the central banks of the US, the UK, Switzerland, Canada, Europe and Japan have committed to co-ordinated liquidity measures to alleviate financial strains increasingly being felt by global banks has seen risky assets rally.
Caxton FX’s Richard Driver said that the news has been received very positively by the market, confidence is up and riskier assets such as equities are booming: “The markets love co-ordinated global action, and it is no surprise to see equities bounce and safe-haven positions reversed in favour of riskier currencies such as the euro. These measures reveal that global leaders have a sense of how serious the global financial situation has become and are willing to act decisively, and more importantly, collectively. Adding liquidity addresses a global problem but there is no doubt that European banks will be the most relieved.”
Driver added: “More action will be required, however, to fully take the pressure off the eurozone’s struggling banking sector. For example, the European Central Bank [ECB] can start by cutting its base rate from 1.25% at its monthly meeting next Thursday.”
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