BoE fell short of estimates, GBP/USD points to the downside

The Bank of England provided help to the government and the economy but probably fell short of expectations as QE is increased by £100, the lower bound of expectations. GBP/USD, which is trading just above the 1.25 level, has room to fall, FXStreet’s analyst Yohay Elam reports.

Key quotes

“The BoE met expectations by announcing it is expanding its bond-buying scheme by £100 billion. For the reaction in sterling, the ‘Old Lady’ fell short of estimates of some participants which foresaw an expansion of £150 to £200 billion. In the coronavirus era, more money printing is better for the underlying currency as it funds fiscal relief and stimulus.”

“The BoE said it expects to run through its new funds by year-end and that implies a slower pace of purchases. Andrew Bailey, Governor of the BoE, seems reluctant to ‘do whatever it takes’ – and that does not bode well for the economy nor for sterling.”

“Andy Haldane, the bank's chief economist and usually a dove, surprised by voting against all the other eight peers in the Monetary Policy Committee (MPC) by rejecting further support. If he continues throwing his weight against the further stimulus, others may follow.”