British Pound: USD/GBP (GBP=X) BoE holds off from pumping further stimulus into Britain’s economy
Sterling rose by around half a cent versus the dollar on Thursday, after the Bank of England held rates steady at 0.1%, as expected, and held off on further stimulus.
The pound rose to as much as $1.2380 from $1.2331 before the announcement. It was last up 0.1% on the day GBP. Against the euro, the pound hit a high of 87.25 pence and was last at 87.39 pence, still rangebound EURGBP.
The BoE held off from pumping further stimulus into Britain’s economy but two of its nine policymakers voted for an increase in its bond-buying programme.
The central bank kept the Bank Rate at its all-time low of 0.1% and left its target for bond-buying, most of it British government debt, at 645 billion pounds.
British Pound Forecast
Shayne Heffernan Trade Idea
“Sterling will be nearly 4% stronger in a year than it is now, based on expectations that Britain will secure a trade deal with the European Union this year despite its tough initial stance.
On Monday sterling took a pummelling after Prime Minister Boris Johnson set tough terms for the trade talks. Some of the forecasts were gathered before Johnson’s speech.
Britain left the EU on Friday and Johnson’s comments on Monday have rekindled fears of a cliff-edge – whereby no trade deal is agreed – at the end of an 11-month transition period which Johnson has repeatedly said he won’t ask to extend.
Foreign exchange strategists have repeatedly said that leaving without a deal, and so trading on World Trade Organisation rules only, would be rough for the economy and the worst outcome for the pound.
The currency ended January on a high note after the Bank of England surprised many by leaving borrowing costs on hold but fell as much as 1.7% to $1.2984 on Monday. It was trading around $1.30 on Tuesday after better-than-expected construction data.
Median forecasts in the Jan. 31-Feb. 4 poll of 65 strategists showed the pound would be up at $1.31 in a month, $1.32 in six months and then $1.35 in a year’s time.” Shayne Heffernan PhD in Economics
Why This Matters
The Bank of England held off further stimulus measures but said it was ready to take fresh action to counter the coronavirus hammering which could cause the country’s biggest economic slump in over 300 years in 2020 before a bounceback in 2021.
The BoE said its Monetary Policy Committee kept Bank Rate at its all-time low of 0.1% and left its target for bond-buying, most of it British government debt, at 645 billion pounds ($797 billion).
However, two of its nine policymakers – Michael Saunders and Jonathan Haskel – voted for 100 billion pounds’ worth of more bond-buying firepower.
In what it called an illustrative scenario, the BoE said it saw a plunge of 14% in Britain’s economy in 2020 followed by 15% bounce-back in 2021.
Such a scenario would require very significant monetary and fiscal stimulus, it said.
Many economists expect the BoE to increase its asset purchase programme next month, before the extra 200 billion pounds it gave itself in March is exhausted by the furious pace of its buying of British government debt.
“However the economic outlook evolves, the Bank will act as necessary to deliver the monetary and financial stability that are essential for long-term prosperity and meet the needs of the people of this country,” Governor Andrew Bailey said.
“This is our total and unwavering commitment.”
Both decisions announced on Thursday were in line the forecasts of most economists in a Reuters poll.
Britain’s government has already rushed out spending and tax measures worth about 100 billion pounds to try to counter the effect of its coronavirus lockdown.
The BoE said it expected a 25% plunge in British gross domestic product in the April-June period with the unemployment rate more than doubling to 9%.
Sterling rose after the central bank’s announcement, initially gaining half a cent against the U.S. dollar before falling back a bit.
Last week, the U.S. Federal Reserve restated a pledge to keep interest rates low and continue offering trillions of dollars in credit as long as the economy needs it, and the European Central Bank kept the door open to further stimulus.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1.28.
The projected lower bound is: 1.20.
The projected closing price is: 1.24.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 16.6276. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 10 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.71. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 32 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -57. This is not a topping or bottoming area. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed up 0.005 at 1.240. Volume was 65% below average (consolidating) and Bollinger Bands were 54% narrower than normal.
Open High Low Close Volume 1.234 1.240 1.231 1.240 41,729
Technical Outlook Short Term: Oversold Intermediate Term: Bullish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 1.24 1.24 1.27 Volatility: 10 21 14 Volume: 110,026 128,847 113,068
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX GBP= is currently 2.1% below its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods.
Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on GBP= and have had this outlook for the last 20 periods.
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