By Carl Delfeld of the Chartwell ETF Advisor
After Canada cut its benchmark rate earlier this week, attention now turns to England and the European Central Bank. And what would be the effect on markets and the exchange-traded funds that track them?
The Bank of England today cut interest rates from 5.75% to 5.5% on Thursday as its monetary policy committee judged that worsening conditions in financial markets and a tightening supply of credit had increased the risks to growth and inflation.
“Although output in the United Kingdom has expanded at a brisk pace for the past two years, there are now signs that growth has begun to slow,” the Bank said in a statement released alongside the decision. The rate cut will probably help support and strengthen the value of the US dollar.
In terms of the UK ETF (EWU), it will cut both ways by increasing prospects for economic growth but weakening the pound short term. The move also increases the likelihood that the ECB will also trim its benchmark rate.