BOE’s Bailey: We do expect a negative quarter in Q1, GBP/USD unfazed

“We do expect a negative quarter in the first quarter of 2021,” the Bank of England (BOE) Governor Andrew Bailey said in an interview with Daily Echo on Friday.

Additional comments

“Clearly there has been a disruption, no surprise there. On the other hand, there’s a clear message that there is a very solid and sustained and growing underlying container trade, for instance.”

“Obviously it’s hugely hit, as we know, but some sense of optimism that with the news on the lifting plan, vaccination program, reduction in cases of COVID, that there’s some light coming through at the end of the tunnel, a sense of some renewed interest, some beginnings of stirrings in terms of getting ready to start planning things.”

“So, I came away there with a sense of it’s been really huge hit but a sense of 'Maybe we’re now beginning to see real light coming through at the end of the tunnel'.

“What I’ve heard today adds a lot of really helpful flavor to the broad picture we have.”

“The impact of Covid on the economy had been “very unevenly felt.”

“Some parts of the economy, particularly service sectors that rely on a close human contact – non-essential retailing, hospitality, travel – badly hit, some other parts not particularly hit. If you’re an online retailer, you’re doing pretty well actually, so it is a mixed story in that respect and that pattern comes through in what I’ve heard.”.

“The impact of the second lockdown last year had been less severe than the first. “Obviously we’re now in the third lockdown which is a more substantial one and we do expect a negative quarter this quarter, but not in any sense like the one we had in spring of last year.”

Market reaction

The pound paid a little heed to the comments from Governor Bailey, as the price-action around the US Treasuries and the dollar remains the main market driver.

GBP/USD drops 0.39% to 1.3956, having recovery from daily lows of 1.3944.