Forex News
- Silver posts strong gains on Tuesday as buyers take advantage of the recent pullback to re-enter the market.
- The macroeconomic backdrop remains supportive for precious metals despite renewed firmness in the US Dollar.
- A relative easing in geopolitical tensions could, however, cap near-term upside momentum.
Silver (XAG/USD) rebounds sharply on Tuesday and trades around $85.30, up roughly 6.50% on the day at the time of writing. The white metal recovers part of the ground lost during last week’s violent correction, as investors gradually return to the precious metals space amid prices seen as more attractive.
The recent pullback in Silver was largely driven by technical factors, including position unwinding and margin-related liquidations, rather than a clear deterioration in fundamentals. The ongoing rebound highlights an environment still marked by elevated volatility, while demand for real assets remains well supported.
From a macroeconomic perspective, expectations of monetary easing continue to play a key role. Markets are still pricing in the prospect of further rate cuts by the Federal Reserve (Fed), which structurally weighs on real yields and supports the appeal of non-yielding assets such as Silver. The nomination of Kevin Warsh as the next head of the US central bank has provided temporary support to the US Dollar (USD), but this effect is fading as investors refocus on rate cut bets.
Meanwhile, US Dollar dynamics remain a key driver for Silver. The US Dollar Index (DXY) holds near recent short-term highs, which could restrain the white metal’s upside momentum. A firmer Greenback tends to make Silver more expensive for international investors, potentially limiting buying interest.
On the geopolitical front, signs of easing tensions between the United States (US) and Iran, along with the announcement of a trade deal between the US and India, have helped improve market sentiment. This relative de-escalation reduces immediate safe-haven demand and could encourage Silver to enter a consolidation phase following its strong rebound.
Finally, the slowdown in the flow of US economic data, linked to the partial federal government shutdown, keeps uncertainty elevated around the near-term economic outlook. In this context, movements in the US Dollar and expectations surrounding US monetary policy are likely to continue steering the trajectory of Silver in the coming days.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- The Australian Dollar strengthens after the RBA delivers a widely expected 25 bps rate hike.
- Markets price further RBA tightening amid persistent inflation pressure.
- Dovish Fed expectations add upside bias to AUD/USD.
The Australian Dollar (AUD) trades on the front foot against the US Dollar (USD) on Tuesday, after the Reserve Bank of Australia (RBA) delivered a widely expected interest rate hike, lifting the Aussie broadly across the board.
AUD/USD is trading around 0.7011, hovering just below its intraday high of 0.7050 and up about 0.88% at the time of writing.
The RBA raised the cash rate by 25 basis points (bps) to 3.85% in a unanimous vote, marking its first rate increase since 2023, as policymakers responded to elevated inflation pressure.
In its monetary policy statement, the central bank said that “while inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025,” adding that the Board judges part of the recent rise in inflation reflects stronger capacity pressures. As a result, the policymakers consider that inflation is likely to remain above the 2-3% target for some time.
The central bank also noted that, while part of the recent pick-up in inflation reflects temporary factors, private demand is growing faster than expected, capacity pressures are higher than previously assessed, and labour market conditions remain slightly tight.
Meanwhile, Governor Michele Bullock said the Board will not provide forward guidance and will remain firmly focused on incoming data, stressing that policymakers do not yet know whether this move marks the start of a tightening cycle.
She added that the Bank “cannot allow inflation to get away from us”, noting that while the economy is in a good position, it remains constrained on the supply side.
According to a BHH report, the swaps market is now pricing in an around 80% probability of another 25 bps rate hike in May, and about 60 bps of total tightening over the next twelve months.
Looking ahead, monetary policy divergence between the RBA and the Federal Reserve (Fed) is likely to keep AUD/USD tilted to the upside, with markets pricing in around 50 basis points of Fed rate cuts by the end of the year.
Attention now turns to Australian employment data and the Services Purchasing Managers Index (PMI), both due on Wednesday, which could provide the next near-term catalyst for the Aussie.
In the United States, the Nonfarm Payrolls (NFP) report, originally scheduled for Friday, has been delayed due to the ongoing partial government shutdown, leaving investors to rely more heavily on private labour indicators, including ADP Employment Change. The US economic calendar will also feature the Services PMI on Wednesday.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
The Japanese Yen (JPY) experienced significant volatility at the start of 2026, trading between 153 and 159 before finishing the month slightly stronger. National Bank of Canada (NAB) analysts Stéfane Marion and Kyle Dahms expect yen appreciation in the second half of 2026, driven by broader USD dynamics and potential interest rate increases by the Bank of Japan.
Yen shows resilience amid market stress
"While we remain cautious over the next six months, we still expect yen appreciation in the second half of 2026, driven by broader U.S. dollar dynamics and the possibility that a strengthening renminbi gives the Bank of Japan scope to raise interest rates."
"Taken together, the latest developments suggest that the recent Yen appreciation in January reflected stabilization efforts and market adjustment rather than renewed confidence in Japan’s fundamentals."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Standard Chartered's report indicates that China's Producer Price Index (PPI) deflation likely eased to 1.5% year-on-year in January, driven by month-on-month increases in metal and energy prices. The report also notes that CPI inflation may have moderated due to base effects, while core CPI likely rose due to gold prices and seasonal factors. The official manufacturing PMI showed a slight decline, suggesting a cautious outlook amid geopolitical risks.
PPI and CPI trends in focus
"PPI deflation may have eased to 1.5% y/y in January on m/m increases in metal and energy prices."
"CPI inflation likely edged down 0.2ppt to 0.6% y/y in January on base effects."
"We estimate that PPI rose 0.3% m/m on higher metal and energy prices."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- NZD/USD advances on Tuesday, benefiting from a pullback in the US Dollar after two days of gains.
- The New Zealand Dollar is supported by expectations of monetary tightening by the RBNZ later this year.
- US Treasury yields remain elevated, which could nevertheless limit the extent of the pair’s rebound.
NZD/USD recovers and trades around 0.6050 on Tuesday at the time of writing, up 0.75% on the day, after two consecutive days of decline. The rebound mainly reflects a pause in the appreciation of the US Dollar (USD), which is giving back part of its recent gains against major currencies.
The Greenback remains supported in the background by elevated US Bond yields. The yield on the 10-year US Treasury note hovers around 4.27%, following a sharp rise in the previous day. This upward pressure on yields is driven by US macroeconomic data seen as solid and by cautious monetary policy expectations from the Federal Reserve (Fed), which could cap a deeper pullback in the US Dollar in the near term.
In the United States (US), the latest manufacturing data surprised to the upside. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) rose sharply, signaling a return to expansion territory and highlighting the resilience of the US economy. These figures support the view that the Fed can afford to keep policy restrictive for longer, despite recent comments from some officials arguing for monetary easing.
On the New Zealand side, the local currency remains broadly supported despite mixed domestic data. Building permits released by Statistics New Zealand fell in December, reversing the increase seen in the previous month and underscoring ongoing fragility in the housing sector. These figures, however, have not had a lasting negative impact on the New Zealand Dollar (NZD).
The main support for the Kiwi comes from monetary policy expectations. Investors believe the Reserve Bank of New Zealand (RBNZ) could begin raising interest rates later in the year. The first policy meeting under the leadership of the new Governor, Anna Breman, is being closely watched, as markets look for clear guidance on the central bank’s future policy stance.
Sentiment around the NZD is also helped by a more favorable external backdrop. Encouraging indicators from China, New Zealand’s largest trading partner, point to an improvement in manufacturing activity, reinforcing the outlook for growth-sensitive currencies.
Market participants are now turning their attention to upcoming New Zealand labor market data due later in the day. The fourth-quarter Unemployment Rate is expected to remain steady at 5.3%, while employment is forecast to increase modestly. These figures could play a key role in shaping short-term NZD/USD dynamics by refining expectations for the RBNZ’s policy path.
New Zealand Dollar Price Today
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.22% | -0.20% | 0.09% | -0.17% | -0.83% | -0.63% | -0.57% | |
| EUR | 0.22% | 0.01% | 0.31% | 0.05% | -0.61% | -0.41% | -0.35% | |
| GBP | 0.20% | -0.01% | 0.32% | 0.04% | -0.62% | -0.42% | -0.35% | |
| JPY | -0.09% | -0.31% | -0.32% | -0.26% | -0.92% | -0.73% | -0.65% | |
| CAD | 0.17% | -0.05% | -0.04% | 0.26% | -0.67% | -0.46% | -0.39% | |
| AUD | 0.83% | 0.61% | 0.62% | 0.92% | 0.67% | 0.20% | 0.28% | |
| NZD | 0.63% | 0.41% | 0.42% | 0.73% | 0.46% | -0.20% | 0.07% | |
| CHF | 0.57% | 0.35% | 0.35% | 0.65% | 0.39% | -0.28% | -0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
Societe Generale analyst Kunal Kundu notes that the US will reduce its tariffs on Indian goods to 18% from 50%, while India is expected to eliminate tariffs on US goods. However, India has not confirmed the zero-tariff access or the cessation of Russian oil purchases. The immediate tariff reduction is seen as a boost for Indian exporters, although the macroeconomic implications remain uncertain.
US tariff reduction impacts Indian exports
"The US will reduce its tariffs on Indian goods to 18% from the current 50% (including the punitive tariff of 25% for importing Russian crude) with immediate effect. India will reduce its tariff and non-tariff barriers on US goods to zero."
"So far, India has only confirmed a tariff reduction, with no official confirmation of (i) zero‑tariff access for U.S. goods, (ii) cessation of Russian oil purchases, or (iii) a $500bn procurement commitment."
"What is clear, however, is that the immediate reduction of U.S. tariffs on Indian exports to 18% provides a direct and timely boost for Indian exporters."
"From a sentiment perspective, markets have also reacted positively, with tariff‑related uncertainty now largely behind them."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold recovers as dip buyers return after last week’s violent sell-off from record highs.
- A firmer US Dollar and easing US-Iran tensions may limit near-term upside.
- Technically, price remains supported above the rising 20-day SMA, while Bollinger Bands continue to widen.
Gold (XAU/USD) climbs more than 5% on Tuesday as dip buyers step back into the market following last week’s violent correction from record highs near $5,600. At the time of writing, XAU/USD is hovering near $4,980, recovering after slipping to near four-week lows around $4,402 on Monday.
The sharp sell-off was largely technical in nature, driven by position unwinding and margin-related liquidation rather than clear deterioration in fundamentals. The broader backdrop for Bullion remains supportive, while Tuesday’s rebound highlights still-elevated volatility across the precious-metals space, with Silver up nearly 10% on the day.
That said, Gold may consolidate in the near term in the absence of fresh catalysts, while tentative signs of easing tensions between the US and Iran could temper safe-haven demand. At the same time, renewed strength in the US Dollar (USD) may cap the upside in XAU/USD.
Market movers: US-Iran tensions ease, US-India trade deal announced, DXY rebounds
- Signs of easing US-Iran tensions emerge after Iranian President Masoud Pezeshkian said on Tuesday that he had instructed his foreign minister to “pursue fair and equitable negotiations” with the United States, with the two sides reportedly preparing to send senior envoys to Istanbul later this week for talks on Iran’s nuclear programme. The comments follow remarks from US President Donald Trump that Iran is “seriously talking”.
- US President Trump announced on Monday that the United States and India have agreed on a trade deal under which US tariffs on Indian goods will be reduced from around 50% to about 18%, while India will step up purchases of US products, with commitments that could reach up to $500 billion.
- US economic data flow has thinned after the Bureau of Labor Statistics said on Monday that the January Employment Situation report due on Friday will be delayed because of the partial government shutdown, with the JOLTS report also postponed.
- The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading near one-week highs around 97.40, recovering after slipping to four-year lows last week.
- The rebound in the Greenback comes after markets welcomed US President Donald Trump’s nomination of former Federal Reserve Governor Kevin Warsh as the next Fed Chair. Warsh, who is widely viewed as an inflation hawk, has helped ease market concerns about the risk of aggressive rate cuts under political pressure.
- Upbeat US manufacturing data has reinforced the view that the Fed can afford to remain patient before resuming monetary policy easing. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) jumped to 52.6 in January from 47.9 in December, comfortably beating market expectations of 48.5, while the S&P Global Manufacturing PMI edged higher to 52.4 from 51.9.
Technical analysis: Uptrend intact despite elevated volatility
From a technical perspective, the broader uptrend on the daily chart remains intact. Price is holding above the 20-day Simple Moving Average (SMA), which also represents the middle Bollinger Band, near $4,800, keeping the short-term trend structure constructive despite the sharp and volatile correction from last week’s peak.
Bollinger Bands are widening and the Average True Range (ATR) has surged to around 212, signalling elevated volatility. Momentum indicators have also started to recover. The Relative Strength Index (RSI) stands near 55, rebounding from sub-50 territory and pointing to improving bullish momentum.
At the same time, the trend remains strong, with the Average Directional Index (ADX) elevated around 43, although the indicator is beginning to roll over from recent highs, suggesting the strength of the trend is easing rather than accelerating.
On the upside, the $5,000 psychological level marks the immediate resistance, followed by the upper Bollinger Band near $5,350. On the downside, a break below the middle Bollinger Band would expose initial support around $4,500, followed by Monday’s low near $4,402. A deeper cushion is located at the lower Bollinger Band around $4,250.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
BNP Paribas projects that Germany will experience a return to robust growth in 2026, following a modest recovery in 2025. The report emphasizes that infrastructure spending approved for 2026 will facilitate this growth, despite previous delays. The positive outlook is supported by an increase in industrial production and a favorable investment climate.
Growth recovery expected in Germany
"Germany is expected to return to more robust growth in 2026 for the first time in four years."
"This is reflected in public spending and, as a positive sign, in industrial production of capital goods since the fourth quarter of 2025."
"Germany's potential growth should rebound."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
The recent de-escalation of trade tensions between Canada and China is expected to provide relief for Canadian agricultural exporters, particularly in the Prairies and coastal regions. China will reduce tariffs on Canadian seafood, peas, and canola meal, while Canada will lower tariffs on imports of Chinese electric vehicles. However, uncertainties remain regarding the durability of this truce and its implications for the Canadian auto sector, reports Salim Zanzana from Royal Bank of Canada (RBC).
Trade tensions ease, but questions remain
"The removal of tariffs on seafood, peas, and canola meal is expected to provide meaningful relief to the Prairies, parts of Atlantic Canada, and B.C.—regions that have, so far, not been able to fully offset export losses. For these provinces, the tariff removals significantly reduce downside risks to our forecasts this year."
"For the Prairies, the reduction in the tariff rate on canola seed from 75.8% to 15% marks a meaningful improvement, though the remaining levy may still pose some friction."
"The truce provides some added confidence heading into the 2026 seeding season with canola prices tracking broadly in line with levels observed at this time last year."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- GBP/USD trades sideways as a light UK and US economic data calendar keeps markets range-bound.
- The US Dollar holds near one-week highs after Kevin Warsh’s Fed nomination, but longer-term policy and fiscal risks continue to limit upside.
- Attention turns to the Bank of England’s policy decision, with markets expecting rates to remain unchanged at 3.75%.
The British Pound (GBP) trades in a tight range against the US Dollar (USD) on Tuesday, with GBP/USD struggling to find direction as a thin economic calendar in both the United States (US) and the United Kingdom (UK) keeps price action subdued. At the time of writing, the pair is consolidating near 1.3690, pausing a two-day losing streak.
A steady US Dollar is capping upside attempts in GBP/USD. The Greenback staged a sharp rebound from four-year lows after markets welcomed US President Donald Trump’s nomination of former Federal Reserve (Fed) Governor Kevin Warsh as the next Fed Chair.
Warsh’s nomination has eased fears of aggressive rate cuts under political pressure, given his broadly hawkish policy stance.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading near one-week highs around 97.58.
However, structural headwinds for the US Dollar, including uncertainty surrounding US President Trump's disruptive trade agenda, repeated tariff threats and rising government debt, continue to weigh on the longer-term outlook, keeping GBP/USD tilted to the upside.
On the monetary policy front, recent US data has strengthened the view that the Fed can keep interest rates on hold for longer, even as markets still look for roughly two rate cuts later this year.
Speaking on Tuesday, Stephen Miran repeated his call for lower interest rates, saying the central bank needs to cut rates by about one percentage point this year.
Separately, Richmond Fed President Thomas Barkin said the US economy remains “remarkably resilient” and noted that the rate cuts delivered so far have helped support the labour market, while policymakers continue to work through the “last mile” of returning inflation to target.
Meanwhile, the Bureau of Labor Statistics (BLS) said on Monday that the January US jobs report, due on Friday, will be delayed because of the ongoing partial US government shutdown, leaving investors to rely on private-sector indicators, with the ADP Employment Change report scheduled for Wednesday.
In the United Kingdom, attention is firmly on the Bank of England (BoE) interest rate decision on Thursday. Markets widely expect the BoE to leave its policy rate unchanged at 3.75%, as underlying inflation pressure remains elevated.
That said, investors still see scope for rate cuts later this year, after policymakers signalled at their previous meeting that the scale and timing of further easing would depend on how the inflation outlook evolves, while stressing that any policy adjustment is likely to follow a gradual downward path.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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