GBP: Underwhelming Response To Overwhelming Stimulus; What’s Next? –


The BOE offered a massive stimulus package, but the pound did not collapse. What’s next? Here is the view from CIBC:

Here is their view, courtesy of eFXnews:

A rate cut was expected, and some other measures were previously hinted at, but the £60bn in government bond purchases, £10bn in corporate bond buying and new Term Funding Scheme (potentially worth another £100bn) went above and beyond what was expected.

So the fall in sterling by “just” 1.5% on the day to remain well above recent lows still is a little surprising.

That could partly be because positioning was already so skewed against the pound. It could also be because analysts are doubting whether the economy will behave quite as badly as the BoE expects, with outperformance potentially seeing a rethink down the road. Certainly, a lot of emphasis is being placed on the services PMI, which doesn’t always have a significant correlation with GDP.

However, should the economy weaken we expect sterling to follow suit and dip to the mid-1.20’s by year-end.

GBP net positioning is already at extremes

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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