Bank of England Cautiously optimistic with negative rates still on the table

When?

Thursday at 12:00 noon followed by Andrew Bailey’s press conference at 12:30

What to watch?

The Bank of England is not expected to move on policy when it makes its monetary policy announcement and updates the bank’s quarterly forecasts.
The BoE raised its QE purchases in November to £875 billion, up from £725 billion. The health of the UK economy has deteriorated further since the last meeting as the UK entered into its third national lockdown.

Not quite ruling out negative rates

Whilst the central bank has refused to rule out cutting interest rates BoE Governor Andrew Bailey has put more distance between himself and a move into negative rates in recent comments. Meanwhile, other members on the monetary policy committee remain enthusiastic about the strategy.

In this meeting the BoE will publish the results to its consultation on negative interest rates. The central bank is broadly expected to embrace negative rates as a tool but to stop well short of using them. Expectations are for interest rates to remain at or above 0.1% the current rate through to mid 2023

Brighter outlook eases the pressure on BoE

That said, with Brexit behind us and the vaccine rollout gathering pace a solid economic rebound could be on the horizon in Q2 and H2. There is a good chance the central bank will focus on the more upbeat outlook over the near-term economic hit from lockdown. With this in mind it appears unlikely that the BoE will act.

GBP/USD technical analysis

Following another retest of the multi year top for GBP/USD of 1.3750 the price has rebounded lower. It has fallen below its 50 sma on the 4 hour chart and is currently being contained by the 100 sma at 1.3665.

The pair remains within the familiar 150 pip range for a second straight week after repeated failures to convincingly break above 1.37 resistance zone suggestion weakness in the price at this level.

The 4 hour chart is starting to paint a bearish picture, supported by a depressed RSI. However, the weekly chart supports a bullish set up and the monthly chart fading bullish momentum amid overbought conditions. With a mixed picture GBP/USD could remain directionless for now.

Immediate support can be seen at 1.3660 100 sma prior to 1.3605 low 26th January. A break through here could see more bears jump in.
Should 1.3660 hold, resistance at 50 sma at 1.3695 comes into play before the bulls look for another attempt on 1.3750.

Learn more about trading forex

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.