GBP/USD keeps range around 1.3050 on Tuesday after the pound staged a modest relief rally yesterday after the new COVID-19 restrictions announced by Prime Minister Boris Johnson. At the same time, the looming risk of negative rates being imposed in the UK resurfaced again, economists at MUFG Bank apprise.
Key quotes
“The UK government unveiled a new three-tier COVID-19 alert system. Under the new system, Liverpool became the first region in England to have even tougher lockdown restrictions imposed as it is now classified as being on ‘very high alert’ for COVID-19. It had been speculated that other northern regions including Manchester and Newcastle would have similar tougher restrictions imposed. Instead, those regions that are already subject to some local restrictions have been placed on ‘high alert’.”
“While there was some initial relief that the new measures are not as restrictive for economic activity as feared, it remains to be seen whether they will have much effect at dampening the spread of COVID-19 which has surged in recent weeks. There is a clear risk that more restrictions will be imposed in the coming weeks/month.”
“It was reported that the BoE has asked commercial banks how ready they are for negative rates. The BoE wrote to banks it regulates to ‘assess the appropriateness of a negative official bank rate alongside all of its other tools’. However, the report had only a limited impact on the UK rates market and the pound. Deputy Governor and chief executive of the Prudential Regulation Authority Sam Woods told banks that the letter was ‘not indicative that the MPC will employ a zero or negative rate policy rate’. It was followed by comments from BoE Governor Bailey later in the day stating that the BoE is not yet ready to implement negative rates.”
“Recent comments from BoE officials have signalled that if negative rates are to be introduced, it is more likely to be from later next year. It has helped dampen downside risks for the pound in the near-term.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends gains above 1.0700, focus on key US data
EUR/USD meets fresh demand and rises toward 1.0750 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold closes below key $2,318 support, US GDP holds the key
Gold price is breathing a sigh of relief early Thursday after testing offers near $2,315 once again. Broad risk-aversion seems to be helping Gold find a floor, as traders refrain from placing any fresh directional bets on the bright metal ahead of the preliminary reading of the US first-quarter GDP due later on Thursday.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price.
Meta takes a guidance slide amidst the battle between yields and earnings
Meta's disappointing outlook cast doubt on whether the market's enthusiasm for artificial intelligence. Investors now brace for significant macroeconomic challenges ahead, particularly with the release of first-quarter GDP data.