BoE Policy Decision - GBP Picks Up But Central Bank Warns of Slumping Q2 GDP

British Pound News, Price and Analysis:

• Bank of England leaves interest rates and QE unchanged.
• Monetary Policy Report warns of shocking slump in Q2 GDP.

Bank of England (BoE) Unchanged but Q2 Growth and Unemployment Look Dire

The latest Bank of England (BoE) policy meeting saw all policy measures left unchanged but the accompanying MPC warned of a potential slump in Q2 GDP and rising unemployment. Interest rates were left untouched at 0.1% while the bond buying program, QE, remained at GBP645 billion.Two MPC members, Michael Saunders and Jonathan Haskel, voted to increase QE by GBP 100 billion. Bank of England governor Andrew Bailey is scheduled to speak about today's decision at 10:00 UK.

The Monetary Policy Report however warned of a potential huge fall in UK Q2 GDP.

‘While there are wide bands of uncertainty around any estimates of activity at the present time, UK GDP is expected to be close to 30% lower in 2020 Q2 than it was at the end of 2019 (Chart 1.2). UK GDP is expected to have fallen by around 3% in 2020 Q1 and then to fall by a further 25% in Q2’

The report also said that unemployment is expected to rise to 9% in Q2.

Monetary Policy Report – May 7, 2020.

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GBP/USD move around 30 pips higher on the announcement after selling off late-Wednesday. On the daily GBP/USD chart the 50-day moving average is acting as initial support.

GBP/USD 15 Minute Chart (May 7, 2020)

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