Thursday’s BoE policy announced caused a little initial volatility for the pound, though after a knee jerk increase in the value of EUR/GBP, the pound has subsequently claimed back the lost ground. The upbeat message on the economy should keep the pound bid – Jane Foley Senior, FX Strategist at Rabobank, forecasts the EUR/GBP pair at 0.84 on a six-month view.
The Monetary Policy Report has brought some upgraded UK economic forecasts
“The news that the pace of asset purchases will slowdown was not a surprise to Bank of England watchers. Either the Bank would have to soon drop the pace or the target of the stock of these purchases would have to be increased at some point. Chief economist Haldane was in favour of lowering this target. That said, he will be leaving the back after the June MPC meeting and his exit will likely allow a more dovish tone to settle over BoE related headlines.”
“The BoE now expects the UK economy to recover to pre-Covid levels over this year and sees growth in 2021 at 7.25% and 5.75% next year.”
“The optimistic tone of the BoE should inject a little more enthusiasm into the outlook for the pound, though with a lot of good news in the price, we continue to expect EUR/GBP only to grind down to 0.84 on a six-month view.”