U.K. Fires Off First Shot of Ambitious Stimulus

(eToro Blog) Last night, the U.K.’s Chancellor of the Exchequer George Osborne laid out his plans for a £100 billion program aimed to support the U.K. economy in advance of what they believe will be a “Eurozone debt storm” that is coming their way. With the support of the Bank of England, the government intends to deploy new firepower. Recently, Sir Mervyn King, the governor of the Bank of England had said that there was a growing case for additional monetary easing, which gave rise to speculation that a more accommodative stance would be forthcoming.

The support program will include the Bank of England’s pledge to U.K. banks to reduce their funding costs provided that they offer in return a commitment to lend. In particular, that is aimed to address rising borrowing costs for mortgages and loans and could create as much as £80 billion in new loans. Seen as a key provision of the support program, the scheme is set to become operational over the next several weeks and banks which partake will be subjected to review criteria to ensure that they have sustained or expanded lending to the non-financial sector. And later today, the U.K. central bank will activate a 6-month emergency liquidity program which will offer banks’ low priced funding at a minimum £5 billion per month.

On OpenBook the GBP/USD is currently lower at 1.5533 and sentiment is overwhelmingly bullish, with 87% buying versus 13% selling. OpenBook trader sa1000748 from South Africa closed out half a dozen positions in the pair over the past 24-hours, profiting equally as well with short positions as long; on average, the trader earned nearly 30% for those six transactions. For the past week, the trader has only traded the GBP/USD pair, with all 10 transactions turning a profit; for the last week, the trader’s P&L was recorded at 188.4%.

The EUR/GBP was trading higher at 0.8128, while sentiment on OpenBook is driven by buyers who outnumber sellers by 92% to 8%. OpenBook trader 84079207 who is from Sri Lanka, earned a 49.5% profit on a long position which earlier struck its TP. The trader is relatively new to OpenBook, but a review of the trader’s account shows a portfolio comprised primarily of currency pairs (91.1%) and indices (8.8%). For the last week, the trader posted a 13.3% loss, but the numbers for the month are firmly in the green at 35.9%.

The BoE governor said that the initiatives, which combined monetary and fiscal policies, were “textbook responses” but that in fact that has brought about comments from some critics who said that they believed a more imaginative response should have been considered in order to boost U.K. growth.

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