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GBP/USD Muted after BOE’s Rate Decision

The Pound Sterling US Dollar exchange rate remained muted this morning as the Bank of England has left rates unchanged. The pairing was trading on the FX market at around $1.2340.

GBP remained muted against the dollar after BoE’s decision, keeping them at an all-time low of 0.1%.

The bank also held off on further stimulus but two BoE policymakers voted in favor of increasing its bond-buying program.

A multi-asset portfolio manager at Janus Henderson Investors, Oliver Blackbourn said the Bank of England did not change its monetary policy. It is surely only a matter of time before they decide to. The 7-2 split on increasing asset purchases indicates a continued dovish bias from certain voting members.

The Bank was hoovering up gilts equivalent to those issued since the additional £200 billion of  quantitative easing was announced. It will run out of firepower to support government spending within months. So, expectations will be high for an increase in the purchase target at the next meeting in mid-June.

However, GBP was offered some support after the bank said it would be ready to take further action. This was to help Britain’s economy which is set to face the largest economic slump in over 300 years.

GBP/USD Outlook on Risk Appetite

The BoE also noted that the country’s GDP may decline by 14% this year, albeit this would be temporary. The pickup in the economy would be relatively rapid.

The bounce-back next year is estimated to be around 15%. The BoE noted this would require a significant monetary and fiscal stimulus.

BoE Governor Andrew Bailey said, however, the economic outlook evolves, the Bank will act as necessary. That is to deliver the monetary and financial stability essential for long-term prosperity and meet the needs of the people. This is their total and unwavering commitment.

The US dollar remained flat against the pound on forex today. Following the release of Chinese upbeat data, risk appetite received support.

Despite forecasts of a -15.7% drop, Chinese exports increased by 3.5%.

The Chinese export numbers sparked hopes China can rebound quickly and help global growth recover.

Forex news reported on Wednesday that private payrolls in the US plunged by a record 20.2 million in April.

This left the U.S. dollar flat as it dampened risk appetite slightly ahead of US jobless data.

Looking ahead to this afternoon, the USD could edge higher against the GBP after the release of US jobless claims.

If initial jobless claims reveal millions more, risk appetite will slump despite many parts of the economy starting to re-open. The disappointing data is likely to send traders flocking back to the safe-haven greenback.

Meanwhile, the sterling could suffer some losses after the release of GfK’s consumer confidence.

If consumer confidence plummets further than expected in May, with the lockdowns continuing to weigh on sentiment, GBP/USD exchange rate will slump.

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