Following two consecutive emergency meetings, the Bank of England (BOE) is up for contributing to the “Super Thursday” at 06:00 AM GMT, with a surprise change in time. The routine Interest Rate Decision will be accompanied by the release of the minutes of its policy meeting and the Quarterly Inflation Report (QIR). Following these catalysts, the market sees the post-policy press conference held by Governor Andrew Bailey, at 09:00 GMT.
Looking backward, the British central bank dragged key interest rate to 0.10% and added £200 billion in its Quantitative Easing (QE) program, currently at £645 billion, during late-March and stood silent since then.
Although the earlier actions by the “Old lady” curbs expectations of any more moves during today’s monetary policy meeting, Andrew Bailey and the company have been fierce during their initial appearances in March, which in turn gives the room for surprises.
Even so, UOB’s Economist Lee Sue Ann cites the room for further easing:
The BoE had cut rates by 65 bps to 0.10%, which is its view of the lower bound, and increased its asset purchase target to GBP645bn. Estimates suggest that the BoE still has plenty of space to expand its current QE program. There are GBP390bn of gilts currently available to buy and that is before the enormous issuance due this year. As such, the sluggish economic backdrop would put the prospect of more BoE easing on the table.
How could it affect GBP/USD?
While more is always on the table for all the central banks amid the current coronavirus (COVID-19) crisis, the BOE is more likely to push the brakes after the latest drastic moves. However, any more rate cuts (highly unlikely) or further addition to the QE can weigh n the GBP/USD pair. Further, the quarterly economic projections and Governor Bailey’s press conference will be watched closely for near-term direction, which isn’t expected to provide any upbeat signs considering the virus outbreak and its economic impact on the UK. It's worth mentioning that the Office for Budget Responsibility (OBR) cited fears of 35% contraction in Q2 2020 GDP.
The cable currently struggles to overcome the early-Asian session drop to the two-week low while taking rounds to 1.2325, down 0.18% on a day. However, the cautious trading ahead of the BOE fails to defy the pair’s sustained trading below 50% Fibonacci retracement of its March month downside. As a result, sellers can keep targeting April 21 low around 1.2250/45 ahead of the previous month's bottom near 1.2165 during the downbeat outcome. On the contrary, if at all BOE surprises the markets, a confluence of 21 and 10-day SMA around 1.2440 can limit the pair’s recoveries beyond the support-turned-resistance line of 1.2345.
About the BOE interest rate decision
BOE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
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