At the end of the G20 meeting, the countries pledged to not weaken their currencies. Today, the Bank of England said it would hold rates steady at 0.5% but it would continue its policy of “quantitative easing.” Quantitative easing is simply a codeword for printing more money so this will definitely hurt the British pound. Despite the G20 pledge, it’s obvious that Britain doesn’t want to stop lowering their currency.
Meanwhile our Fed has been faced with a problem. Foreign is fleeing the country so the Fed had to step in and buy the Treasuries that China used to buy. We can see the impact on the trade deficit which has been shrinking for several months. The bad news is that exports were plunging faster than imports.
In the latest monthly data, exports finally started to rise, which is the first sign of hope. A weaker U.S. dollar should continue to boost exports.