GBP/USD: BoE’s cut pound-positive

The cut's pricing, accompanying lending scheme, and government coordination ahead of the budget provide room to the upside. GBP/USD initially tumbled below 1.29 and hit 1.2827, but recovered swiftly and for good reasons, Yohay Elam from FXStreet informs.

Key quotes

“Both outgoing BOE Governor Mark Carney and Andrew Bailey who takes over next week had stated that they are ready to act in face of the severe coronavirus crisis. While they seemed relatively calm in their statements, it was clear that a move was on the cards.”  

“The ‘Old Lady’ not only slashed interest rates but also launched a lending scheme worth £100 to small and medium-sized businesses. This kind of additional stimulus could provide a cushion to the economy at times of trouble, as consumers are stuck at home.”

“While the BOE announced its cut outside its calendar of rate decisions, the decision comes just hours before the UK government presents its budget. Chancellor of the Exchequer Rishi Sunak – only four weeks on the job – is on course to provide a significant increase in expenditure.” 

“The pound's recovery against the dollar also comes as President Donald Trump failed to appear to the White House's press conference about US fiscal stimulus.”

“Later in the day, US Treasury Secretary Steven Mnuchin testifies on Capitol Hill and may provide details on what the administration plans. The US also releases Consumer Price Index figures for February later in the day, with Core CPI set to remain at 2.3% yearly.”