The statement that accompanied today’s 50 bps rate cut the Bank confirmed that it was working closely with HM Treasury in order to present a coordinated front. The reassurance that the UK authorities have prepared a comprehensive package to counter the economic impact of the coronavirus should also provide support for the pound, as economists at Rabobank note.
Key quotes
“The initial market reaction to the Bank’s policy announcement this morning is that UK policy makers are handling the crisis well. At 12:30 GMT the baton will be handed over to an inexperienced Chancellor and a new government to outline what the fiscal responses will be.”
“If the Chancellor can maintain the momentum started by the BoE this morning GBP is likely be able to hold its own vs. the USD and the EUR.”
“Over the next couple of days, how the market judges the fiscal responses of the US government to the crisis and the monetary policy of the ECB will be instrumental in determining the near-term outlook for EUR/GBP and GBP/USD.”
“While we see the potential for GBP to outperform the EUR in the coming weeks, upside potential in GBP/USD could be sticky given the role of the greenback as a store of value.”
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