Global Economy Assignment: Analyzing Interest Rates, Currencies, Bonds

This assignment analyzes an article by John Authers published in the Financial Times, discussing the global economy with a specific focus on interest rates, currencies, and bonds. The analysis highlights that market forces, rather than individual banks, primarily determine loan interest rates. It also examines the impact of central bank decisions, such as the Sweden Riksbank's rate hike, and their influence on currency values, particularly the pound sterling. The assignment further explores how investor expectations, shaped by events like the Bank of England's published minutes, can influence currency spot prices in the exchange market. The provided analysis references the original article and another related academic paper.

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Global Economy
13-Jul-19
Student Details

Global Economy
The Short View
John Authers was the investment editor in the Financial Times when he published an
article named, The Short View on 20th June 2007 which discussed the market interest rate,
currencies, and bonds (Authers, 2007). The article stated that the interest rates of loans were
decided with the forces of the market and not by the individual banks. However, central
banks have little control or manipulation in the field. The statement indicates the investor's
unexpected change in the interest rate and when Sweden Riksbank raised the rate and
provided a warning for future no investor was ready for that change. The unforeseen rise in
interest rate also caused an appreciation in the pound sterling (Antell, & Vaihekoski, 2019).
Because of which the people of the market expected further increase in the value of the
currency in the near future by viewing the published minutes from the Bank of England. The
expectations of the people for an increase in the currency value increased its spot price in the
exchange market.
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Global Economy
References
Authers, J. (2007, 06 20). The Short View: Currencies and Bonds. Retrieved 07 10, 2019,
from Financial Times: https://www.ft.com/content/ac69ff36-1f48-11dc-ac86-
000b5df10621
Antell, J., & Vaihekoski, M. (2019). Expected and realized returns in conditional asset
pricing models: A new testing approach. Journal of Empirical Finance, 52, 220-236.
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