Sterling Rises on The Back of The BoE Conference

In the wake of easing worries over the Evergrande deficit problem on Thursday, the Pound gained just like most risky currencies as speculators awaited the outcome of the Bank of England conference and any indications about the future for monetary easing. The currency had dropped this week as traders fled to stronger commodities and currencies due to fears that Chinese builder Evergrande might fail on its payments, according to reports. The Bank of England’s interest rate announcement is currently the center of interest.

The Bank of England held its key interest rate steady at 0.1 percent and maintained its equity investment target of 895 billion pounds ($1.22 trillion). This was generally anticipated. Analysts noted that the Bank of England expressed concern about the inflation forecast and expressed a preference for waiting for additional information before adjusting, indicating that the conference was rather dovish.

COVID Stimulus and Inflation Figures

Rate-setters are reluctant to vote for an immediate end to COVID-19 support, particularly after the United Kingdom’s income activity abruptly slowed in July and inflationary pressure hit a nine-year high, setting a new record. Following the release of the inflation figures, the markets have reacted by revising up their forecasts for rate hikes from their current record low of 0.1 percent to May 2022. After earlier predicting that inflation may momentarily reach 4 percent by the end of the year, traders will be looking out for any indications that Bank of England officials are no longer seeing the spike in price growth as only temporary.

Many experts believe the Federal Reserve’s hawkish stance in its policy statement on Wednesday has increased anticipation that the Bank of England would not appear as dovish as it has in the past as financial institutions across the world design a route out of the coronavirus outbreak stimulus.

BoE Policy Statement Speculation: Gradual Hardening Leaning

MUFG researcher Lee Hardman wrote in a report that, because of the current hawkish rebalancing of Bank of England rate rise forecasts, market players will be keenly analyzing the revised policy statement today for any indication that the Bank of England is getting closer to increasing rates.- “Nevertheless, we feel that the chance of a letdown is larger and that this might lead to a short drop in the value of the pound. We expect that the Bank of England will mostly adhere to the policy statement that was communicated in August when they officially announced a gradual hardening leaning.”

GBP/USD CHART. Source: Tradingview.com

The Pound was recently up 0.2 percent versus the dollar, trading at $1.3648, while the Euro was unchanged at 85.85 pence.

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