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Bank of England Boosts QE by GBP100bn, GBP/USD Spikes Higher Then Calms

Bank of England Boosts QE by GBP100bn, GBP/USD Spikes Higher Then Calms

2020-06-18 11:23:00
Nick Cawley, Strategist
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British Pound (GBP) – Bank of England Decision and GBP/USD Forecast, Chart and Analysis:

  • Bank of England leaves interest rates unchanged at 0.1%, hikes QE by GBP100 billion.
  • MPC says UK Q2 GDP will be ‘less severe’ than set out in May MPC report.

The Bank of England (BoE): A Forex Trader’s Guide

Bank of England (BoE) Boosts QE and Bolsters GBP

The BoE left interest rates unchanged at 0.1% at today’s meeting, as expected, and increased its bond buying program (QE) by another GBP100bn to GBP745bn, again in-line with consensus. The central bank also voted unanimously against cutting rates, dampening market expectations that the BoE is considering negative rates.

The MPC report said that while downside risks to the global outlook remained, the fall in global Q2 GDP may be less severe than expected at the time of the May MPC report. In addition, ‘UK GDP contracted by around 20% in April, following a 6% fall in March. Evidence from more timely indicators suggests that GDP started to recover thereafter’.

UK government bond (gilts) yields turned higher after the release, while GBP/USD also bounced back above 1.2525 after trading around 1.2480 pre-BoE announcement. Market expectations had been building this morning for a GBP150bn QE increase and further talk about negative interest rates.

The BoE will release the minutes from today’s press conference at 14:30 UK.

On Friday, UK retail sales for May are released at 07:00 UK with the month-on-month figure expected to rise sharply to 5.7% from April’s slump of -18.1% while the annual figure is expected around -17% compared to last month’s reading of -22.6%.

GBP/USD Five Minute Price Chart (June 18, 2020)

Bank of England Boosts QE by GBP100bn, GBP/USD Spikes Higher Then Calms
GBP/USD BULLISH
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Change in Longs Shorts OI
Daily -8% 18% 4%
Weekly -9% 10% 0%
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What is your view on Sterling (GBP) – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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