Trade Desk Thoughts - U.K. M4 Money Supply

U.K. M4 Money Supply Actual 1.4%, Expected 0.7%, Previous 0.9%

Release Explanation: Measurement of the value of cash, currency and cash assets held by the public. Monetary policy controls the supply and cost of money and credit. A central bank will increase the supply of money and decrease the cost of borrowing to stimulate an economy and vice versa to slow down an economy. While measuring the cost of borrowing is fairly easy (yield on Treasury Bonds), measuring the money supply can be a more daunting task.

Trade Desk Thoughts: In August the M4 rose by £24.6 billion, or 1.4%, twice as much as analysts’ had predicted. Year over year, the M4 growth rate is standing at 11.5%. The long-run average of the M4 annual growth rate is approximately 13%, however, earlier this year the rate did dip to 10%. The three months annualized growth rate surged to 18% in August, the biggest pace seen in the last few years.

Forex Technical Reaction: The cable spiked 50 pips after the release, but soon retraced the move. Against the euro, the pound is trading lower for the first time in 11 days.

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