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Market Update

• Posted by currencies in Bank of England, coronavirus, Dollar, EUR, GBP, UK, Uncategorised
• May 7, 2020
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The pound rose against the dollar and euro after the Bank of England held rates steady and announced no further stimulus, as expected, and suggested Britain’s economy could bounce back by 15% in 2021.

The Bank of England 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.

In what it called an illustrative scenario, the BoE saw Britain’s economy plunge 14% in 2020 followed by a 15% bounce back in 2021.

The pound was at a low-point before the announcement, having reached a 12-day low versus the dollar on Wednesday, and rose on the news.

The bank’s Monetary Policy Committee kept the Bank Rate at its all-time low of 0.1% and left its target for bond-buying, most of its British government debt, at 645 billion pounds ($797 billion).

However, two of the nine policymakers – Michael Saunders and Jonathan Haskel – voted for 100 billion pounds’ worth of more bond-buying firepower.

Further bond-buying is expected in the coming months, and a suggestion that the bank’s 200 billion of asset purchases announced in March could run out by the end of July may also have played a part in lifting the pound, Rabobank’s Foley said, as it underpinned the expectation that further stimulus will be announced.