The Bank of England – BoE

Bank of England, BoEThe Bank of England, known in short as BoE, is the central national bank of United Kingdom. It was established in 1694 to act as the banker to the English government of that time; today it continues in that tradition to act as banker to the national government of the United Kingdom.

Since it makes monetary policy on behalf of the UK government, its policy decisions impact the lives of everyone in United Kingdom, and its dependencies such as Gibraltar. The bank also prints the notes and mints the coins of the national currency of the UK, which is the British Pound. The GB Pound is one of the leading international currencies, so the policy decisions of BoE also indirectly impact every forex trader.

Role for Bank of England

As with other central banks such as the Federal Reserve of the USA, the primary role of BoE is setting and implementing monetary policy of the country. By changing the interest rate at which other banks can borrow money from it, it can change the availability of money in the economy. This directly impacts savings and investment in the broader economy. Furthermore, it also impacts forex trading directly, especially when you are trading in Pound Sterling.

The Pound Sterling

20 GBP sterling pounds noteThe Pound Sterling, more commonly known as just Pound, is the national currency of the UK, and is regulated by the Bank of England. The symbol for the Pound is £, and it is known as GBP in short. The British Pound is one of the highest valued currencies in the world, currently buying more than USD $1.5 for every single Pound. However, its value against the US Dollar has been steadily declining.

By controlling the national interest rate in the UK, the Bank of England directly influences the value of the GBP. If the Bank of England raises the national interest rate, it makes saving in UK more attractive than in other countries, which in turn increases the value of the British Pound in the forex market.

What to monitor as forex trader

Forex traders closely watch the outcomes and the pronouncements of the meetings of the Monetary Policy Committee to get an idea about its impact on the value of the British Pound. Similarly, comments by the current Governor of the bank, Sir Mervyn King, also elicit wide reception among the forex trading community.

Whether you are trading in the GBP or not, you should follow the news about the Bank of England just because it regulates one of the leading international currencies in the world.