The Bank of England has announced a surprise 50 basis point rate cut from 0.75% to 0.25%.
Both outgoing Governor Mark Carney and his successor Andrew Bailey had previously said that they are ready to act in face of the coronavirus crisis. While the move is not a total surprise, but the timing – outside a scheduled meeting – is responsible for the sharp move in sterling. Moreover, the BOE's new rate of 0.25% puts its at the post-Brexit low, exhausting the "Old Lady's" firepower.
The BOE also announces a new SME worth £100 billion – a lending scheme to businesses. The Monetary Policy Committee has left the bond-buying scheme unchanged at £435 billion.
GBP/USD has dropped from around 1.2935 to a low of 1.2830 before bouncing but remains depressed. Support awaits at 1.2775 and 1.2720. The resistance is at 1.29 and 1.2950.
The government is set to unveil its new budget later today and the move may be coordinated.
See UK Budget Preview: Showing the way with fiscal stimulus? GBP/USD has room to rally
Here is how the move looks on the chart:
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More details about the BOE's surprise decision are here.
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