News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Bullish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • Tune in to @PeterHanksFX 's #webinar at 11:00 AM ET/3:00 PM GMT as he discusses top levels to watch on #DAX, #DOW & more. Register here: https://t.co/Rwbt9avERj https://t.co/qJk1yldbTT
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.17%, while traders in NZD/USD are at opposite extremes with 67.35%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/CNDxMUN4C6
  • UK exporters could face lengthy queues at Kent as the EU plans to enforce full goods controls. Get your #Euro market update from @RichardSnowFX here: https://t.co/vaeoRwtTSx https://t.co/Uuxl5b84T5
  • Commodities Update: As of 13:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.52% Gold: -0.96% Silver: -3.75% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/yfq016GMps
  • 🇺🇸 Markit Manufacturing PMI Flash (SEP) Actual: 53.5 Expected: 53.1 Previous: 53.1 https://www.dailyfx.com/economic-calendar#2020-09-23
  • Heads Up:🇺🇸 Fed Chair Powell Testimony due at 14:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-09-23
  • Indices Update: As of 13:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 1.57% France 40: 1.05% Germany 30: 0.91% Wall Street: 0.54% US 500: 0.19% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/LWKi3vz4C3
  • Heads Up:🇺🇸 Markit Manufacturing PMI Flash (SEP) due at 13:45 GMT (15min) Expected: 53.1 Previous: 53.1 https://www.dailyfx.com/economic-calendar#2020-09-23
  • 'big things have small beginnings' $Gold pullback started to show bearish tendencies on the same day that it set an all-time-high. That daily bar on Aug 7 closed as bearish engulf - buyers have been on their back foot since. https://t.co/qpGkOJCL3J https://t.co/d3PPQ9vf5U
  • 🇺🇸 House Price Index MoM (JUL) Actual: 1% Previous: 1% https://www.dailyfx.com/economic-calendar#2020-09-23
GBP/USD Plunges on BoE Rate Cut and More QE, Growth Outlook Slashed

GBP/USD Plunges on BoE Rate Cut and More QE, Growth Outlook Slashed

2016-08-04 11:43:00
Oded Shimoni, Christopher Vecchio, CFA,
Share:

Talking Points:

- The British Pound plunged versus other major currencies post-BOE.

- BOE cut rate to 0.25% by a unanimous decision - scope for further cuts too.

- Asset Purchase Facility (the BOE’s QE programme) increased to £435b on a split decision

The British Pound plunged versus other major currencies after today’s Bank of England (BOE) rate decision saw the bank rate cut to record lows at 0.25%, as was expected by economists.

The Monetary Policy Committee (MPC) voted unanimously to cut the main rate to 0.25%.

The MPC voted by a split decision to boost the Asset Purchase Facility (the BOE’s QE programme) for a total of £435b from the prior £375b.

The bank also announced the purchase of up to £10 billion of UK corporate bonds in the next 18 months, and new "Term Funding Scheme" to reinforce the pass-through of the cut in the bank rate.

The BOE said that those measures will be financed by issuance of the central bank reserves.

Eight members supported the introduction of a corporate bond scheme (Forbes was against); six members supported further purchases of UK government bonds (Weale, Mccafferty and Forbes were against).

The MPC emphasized they can do more if needed, including further cuts to the key rate.

With the rate cut decision highly expected (the market basically priced in a 100% probability of a cut), attention quickly turned to the other elements in the statement and the Quarterly inflation report.

Contrary to the anticipated rate cut, expectations were only slightly tilted for a hold on a boost to the Asset Purchase Facility. As we mentioned today, this was likely to catch some participants on the wrong side, as it seems the QE addition was perhaps more than the market anticipated.

The other major element of the announcement was the revisions to inflation and growth outlook. The inflation report revealed that the central bank cut its growth forecast for 2017 to 0.8% from the prior 2.3%, while 2018 growth is now seen at 1.8% from 2.3%, on the backdrop of estimated weaker investment and consumption due to Brexit.

The BOE forecast only 0.1% expansion this quarter and left the 2016 number unchanged at 2.0%. This indicates that the central bank do not see a recession on the horizon due to their new measures.

Inflation is forecasted to reach the bank’s 2% target in Q4’17 versus Q2'18 prior, as the weaker Sterling on the Brexit vote adds to inflationary pressures.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 58.3% of traders are long the GBP/USD at the time of writing as traders flipped net long on the drop, apparently trying to pick a bottom. The SSI is mainly used as a contrarian indicator implying further weakness ahead.

You can find more info about the DailyFX SSI indicator here.

Chart 1: GBP/USD 5-Minute Chart (Intraday August 4, 2016)

GBP/USD Plunges on BoE Rate Cut and More QE, Growth Outlook Slashed

--- Written by Oded Shimoni, Junior Currency Analyst; Video produced by Christopher Vecchio, Currency Strategist

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

Follow him on Twitter at @OdedShimoni

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES