1.Bank of England (BoE): Bank of England
Since 1997, the BoE has acquired the function of independently formulating monetary policy. The government uses the inflation target as the standard for price stability, generally measured by the Retail Prices Index excluding mortgages (RPI-X), and the annual increase is controlled below 2.5%. Therefore, although monetary policy is set independently of the government department, the BoE is still subject to inflation standards set by the Ministry of Finance.
2.Monetary Policy Committee (MPC): The Monetary Policy Committee is mainly responsible for formulating interest rate levels.
3.Interest Rates: Interest rate The main interest rate of the central bank is the lowest lending rate (base rate). In the first week of each month, the central bank uses interest rate adjustments to send a clear monetary policy signal to the market. Changes in interest rates usually have a larger impact on the pound. The BoE also sets monetary policy through daily adjustments to interest rates on government bond purchases from discount banks (designated financial institutions that trade money market instruments).
4.Gilts: gilts British government bonds are also called gilts. Likewise, the spread between the 10-year gilt yield and the yield on other national bonds or U.S. Treasury bills over the same period affects the exchange rate of the pound against other currencies . 3-monthEurosterling Deposits: 3-month Eurosterling deposits. Sterling deposits held in non-UK banks are called Euro sterling deposits. The difference between its interest rate and the European deposit rate of other countries over the same period is also one of the factors affecting the exchange rate.
5.Treasury: The function of the Ministry of Finance to formulate monetary policy has gradually weakened since 1997. However, the Ministry of Finance still sets inflation indicators for the BoE and decides the appointment and removal of key BoE personnel.
6.The pound’s relationship with the European Economic and Monetary Union The pound is often under pressure due to Prime Minister Tony Blair’s remarks about the possibility of joining Europe’s single currency, the euro . If the UK wants to join the euro zone, the UK interest rate level must be lowered to the euro rate level. If the public votes to join the euro zone, the pound must depreciate against the euro for the sake of the country’s industrial trade. Therefore, any talk of the UK’s possible entry into the euro zone will weigh on the pound.
7.Economic Data: Economic Data The main economic data in the UK include: initial unemployment, initial unemployment, average income, retail price index excluding mortgages, retail sales, industrial production, GDP growth, purchasing managers’ index, manufacturing and Services Survey, Money Supply (M4), Income and Housing Price Balance.
8.3-month Eurosterling Futures Contract (short sterling): 3-month Eurosterling deposit futures (short-term sterling) The futures contract price reflects the market’s expectations for the Eurosterling deposit rate after 3 months. The difference in the price of futures contracts with the same period in other countries can also cause changes in the exchange rate of the pound.
9.FTSE-100: The Financial Times 100 Index, the UK’s main stock index . Unlike the US and Japan, the UK’s stock index has a relatively small impact on the currency. But despite this, the Financial Times Index and the US Dow Jones Index have a strong correlation.
10.Cross Rate Effect: The impact of the cross rate The cross rate will also have an impact on the GBP exchange rate.