When is the Bank of England rate decision and how could it affect GBP/USD?
|Following three attempts to defy any rate change, while still being dovish, the Bank of England (BOE) is immense pressure to act during the “Super Thursday” at 06:00 AM GMT. Although major market forecasts are against any rate change, hints about more Quantitative Easing (QE) and negative rates will be the key to watch for the GBP/USD traders. The routine Interest Rate Decision will be accompanied by the release of the minutes of its policy meeting and the Quarterly Inflation Report (QIR). Following these catalysts, the market sees the post-policy press conference held by Governor Andrew Bailey, around 11:30 GMT.
Looking backward, the British central bank dragged key interest rate to 0.10% and added £200 billion in its Quantitative Easing (QE) program, currently at £745 billion, during March. However, the coronavirus (COVID-19) wave 2.0 has pushed the “Old lady” to mark more stimulus in order to keep the latest gains of the British pound.
In their latest comments, BOE policymakers have shifted earlier bullish bias and tried conveying the least damages caused by the negative rates. Adding to this, Governor Bailey has been bold to highlight the possibilities of going further down on rates, which in turn makes today’s even crucial for markets.
While identifying the same, FXStreet’s Yohay Elam says,
The BOE is set to leave its policy unchanged but its views on the economy will probably rock the pound. Additional QE could boost sterling while hints about sub-zero borrowing costs would send it lower.
Elsewhere, analysts at Scotiabank highlight downside risks:
No change to the 0.1% Bank Rate is expected. Forecasts will be updated and could showcase the MPC's bias toward downside risks. Expect further jawboning on the negative rate option, but it's unlikely that the results of the BOE's review of this option will be disclosed just yet. At present, markets are pricing a marginally negative policy rate commencing in early 2021.
How could it affect GBP/USD?
While more is always on the table for all the central banks amid the current COVID-19 crisis, the BOE could consider recent economic improvements to keep the status quo. However, any more rate cuts (highly unlikely) or further addition to the QE can weigh on the GBP/USD pair. Further, the quarterly economic projections and Governor Bailey’s press conference will be watched closely for near-term directions, which aren’t expected to provide any upbeat signs considering the virus outbreak and its economic impact on the UK.
The Cable currently prints mild gains of 0.12% while flashing a two-day winning streak to 1.3130. The pair seesaws near the highest since March, flashed last Friday while heading into the London open on Thursday. Considering the pair’s repeated failures to cross a downward sloping trend line since January 31, 2020, at 1.3170 now, coupled with overbought RSI conditions, any disappointment from the BOE will be enough for bears to enter and attack 1.3000 psychological magnet. On the contrary, an upside clearance of 1.3170 will have to cross 1.3200 and late-January top of 1.3210 before targeting December 31, 2019 peak of 1.3285.
Key Notes
BoE Preview: Seven major banks expectations
Bank of England Preview: Three things that will move the pound on “Super Thursday”
GBP/USD Forecast: With room to extend gains despite UK jitters
About the BOE interest rate decision
BOE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.