Bank of England Ramps Up QE Program, Rates Left Unchanged, Sterling Pushes Higher
Bank of England (BoE) and GBP/USD Price, Analysis and Chart:
- Bank of England ramps up QE by GBP150 billion.
- GBP/USD moves higher as interest rates left untouched.
The UK central bank has boosted its bond-buying program by a further GBP150 billion today after the BoE warned that recent Covid-19 developments will weigh on near-term spending and lead to a decline in GDP in Q4 2020. The quantitative program which started in November 2009 now stands at GBP895 billion. All other policy measures were left untouched. The central bank sees UK GDP contracting by 11% in 2020, compared to prior projections of -9.5%, while GDP is set to expand by 7.25% in 2021, compared to August’s projection of +9%.
GBP/USD picked up a small bid post-BoE announcement, due in part to relief that the bank rate was left untouched. There had been talk recently that the central bank was looking at negative interest rates, so a unanimous decision to leave the bank rate untouched gave Sterling a small nudge higher.
Chancellor of the Exchequer Rishi Sunak is set to speak this afternoon and announce a new package of fiscal measures to help boost the economy. Sunak is expected to extend the furlough scheme for the length of lockdown 2.0 if businesses are told to close and he may extend the scheme to Scotland, Northern Ireland, and Wales if they also announce a national lockdown, according to a report in The Daily Telegraph.
GBP/USD Five Minute Price Chart (November 5, 2020)
IG client sentiment data show 51.73% of traders are net-long with the ratio of traders long to short at 1.07 to 1.The number of traders net-long is 20.30% higher than yesterday and 6.34% lower from last week, while the number of traders net-short is 5.91% lower than yesterday and 21.61% lower from last week.
Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.
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