The Impact of Federal Reserve’s Monetary Policy on the Stock, Foreign Exchange and Bond Markets in UK

Abstract

As the virus invaded and policies such as home isolation and remote work were implemented, the global outbreak of the COVID-19 pandemic in 2020 led to severe economic recession worldwide. The high uncertainty in economic development caused by the virus sparked a "cash rush," with people desiring assets with high liquidity, such as cash. This led to turbulence in global financial markets. Different countries' economic development speeds and social conditions, guided by different national policies, also greatly influenced foreign exchange and bond markets. This paper focuses on analyzing the impact of the Federal Reserve's monetary policy during different periods on the three major markets in the UK: the stock market, foreign exchange market, and bond market. This includes an analysis and interpretation of the performance of the UK's three major markets in response to the Federal Reserve's monetary policy, particularly focusing on the most closely watched policies of interest rate hikes and cuts. These analyses provide valuable reference for subsequent market development and how markets should perform prior to anticipating the Federal Reserve's predicted monetary policies.