BoE Preview: Bailey to convey a pound-positive message, assuming no negative rates talk

The Bank of England (BoE) is set to leave its policy unchanged amid growing uncertainties and potentially lean toward pound-positive optimism – at least as long as there is no credible threat of an imminent rate cut, Yohay Elam, an Analyst at FXStreet, reports.

See – Bank of England Preview: Forecast from six major banks

Key quotes

“While the ‘Old Lady’ is set to leave its policy unchanged and does not release its quarterly report at this juncture, its updated views of the economy and hints about the next steps matter. The BoE’s perspective is critical as recent figures project a murky picture and amid Brexit uncertainty.”

“There is a good chance that Bailey and co will opt for a rosier view – vaccines show the light at the end of the tunnel and negotiators continue deliberating. The bank is unlikely to go out of its way, but will likely convey a message of cautious optimism – boosting the pound.”

“Officials at the London-based institution have been flirting with the idea of setting negative interest rates since the spring. While such a move would do little to support lending and the economy, it is undoubtedly adverse for the currency. However, as time passes by, the BoE sounds like the boy who cried wolf – seemingly making toothless threats. Nevertheless, the bank could weigh on the pound by introducing fresh language that would signal setting negative rates in its next meeting. The changes for such a move seem low amid optimism, but that is probably the only risk facing sterling.”