- GBP/USD pares losses following a four-day downtrend and bounces up to 1.2375.
- The BoE statement offers support to the sterling to post a 0.7% recovery from 1.2260 lows.
- Longer-term, the pound might remain heavy amid the negative UK economic outlook.
The sterling is set to break a four-day downtrend against the US dollar with a 0.7% recovery, following the Bank of England’s monetary policy statement. The pair has bounced from two-week lows at 1.2260 regaining more than 100 in the day pips to hit session highs at 1.2375.
Pound appreciates after BoE statement
The GBP/USD has trimmed losses on Thursday, after having lost more than 2% over the previous four days. The market has welcomed the Bank of England’s pledge to take action to counter the consequences of the coronavirus fallout although they have omitted any further monetary stimulus measures.
From a wider perspective, however, the risk remains skewed to the downside, with the pound weighed by the negative economic outlook amid the strong impact of the COVID-19 crisis, and the uncertainty about the Brexit. Against this backdrop, the CABLE is likely to remain heavy over the next weeks.
GBP/USD might dive to 1.1900 in the next three months – Rabobank
The FX analysts at Rabobank see the pound biased to the downside in the mid-term. ‘We see GBP as remaining vulnerable based on our expectation that there will be an extension to the QE programme at next month’s MPC meeting coupled with the fact that Brexit risks remain and due to the fact that the UK government has come under a hail of criticism for its handling of the coronavirus crisis (…) “We see scope for a dip towards GBP/USD 1.19 on a 3-month view.”
GBP/USD key levels to watch
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