GBP/USD: Pessimism from the BoE to send the pound down

The Brexit bonanza has proved short-lived – pound bulls prematurely celebrated PM Boris Johnson’s climbdown before the Federal Reserve sent the safe-haven dollar higher. Now it is the Bank of England’s turn to move cable – and potentially tilt it lower, FXStreet’s analyst Yohay Elam reports.

See – Bank of England Preview: Eight major banks expectations

Key quotes

“PM Johnson agreed to compromise with the ‘rebels’ in his Conservative Party by agreeing to more robust parliament oversight over the Internal Markets bill. Will Brussels accept the modified version of the bill? The block previously laid down an ultimatum to the UK – rescind the legislation by the end of the month or face sanctions.” 

“While the world’s most powerful central bank raised 2020 growth forecasts, it downgraded the one for 2021. More importantly, Federal Reserve Chairman Jerome Powell said the current level of bond-buying is appropriate, disappointing investors. He also indicated fiscal stimulus would be useful. That may come earlier than expected following weak retail sales. Weekly jobless claims figures are eyed later in the day.”

“Andrew Bailey, Governor of the Bank of England, is projected to leave the interest rate unchanged at 0.1% and the Quantitative Easing program at £745 billion. Markets will be watching the bank’s fresh assessment of the economy moving forward. On the one hand, the recovery beat estimates and unemployment remains low at 4.1% in July. On the other hand, uncertainty about Brexit, the furlough scheme, and the virus – as Northeastern England is hit by new restrictions – may weigh on the outlook.”