Cable rises from 1.2490 to 1.2550 before fading gains at the moment
A couple of key takeaways from the BOE decision earlier:
1. QE increased by £100 billion as expected
2. Pace of QE purchases to see buying extend to end of the year (tapering)
3. No mention of negative rates in discussions
Besides the fact that we may see the pace of purchases ease, I don’t think there is much else to scrutinise from the policy decision. The BOE is doing what it can to ensure the economic recovery – it feels like the bare minimum though – without bordering QE-infinity.
That said, they did reassure that they can increase the pace of purchases if necessary.
BOE chief economist Haldane did surprisingly dissent against the decision, arguing that the economic recovery is looking better than expected. But I don’t think there’s much in that.
To sum up, there isn’t much of a change to the status quo but the BOE is just keeping the stimulus tap flowing as they see fit.
As for negative rates, I don’t think it would have been prudent for them to involve such a topic in formal discussions; or at least they won’t leave it on the record.
They will save that for a more rainy day or if and when we do see a threat of a secondary virus outbreak that may ravage the economy once again.
Over to the technical side of things, the rebound in the pound isn’t really amounting to much with cable price action still sitting well below its key hourly moving averages.
That hints that the near-term bias remains more bearish with focus now still on the 100-day moving average at 1.2520 ahead of the close today. Keep below that and the 1.2500 level and sellers would feel more confident about pushing the downside further.
Meanwhile, EUR/GBP also saw a nudge back to 0.8970 on the headlines but buyers held on to support from the 100-hour moving average to move back to 0.8987 currently. The 0.9000 handle remains the key level to watch on the daily for that pair.