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Last week, The Bank of England (BoE) balanced preparedness to adopt NIRP with tapering of QE while outlining potential for a vaccine rollout-led economic rebound. The GBP/USD pair now looks set to push towards 1.40, in the view of economists at Westpac.

Key quotes

“Last week’s BoE policy meeting and Monetary Policy Review (MPR) affirmed the MPC’s accommodative stance as the UK faces a double dip recession due to the current stringent lockdown. However, the MPR also laid out factors that could provide the grounds for a sound recovery through the rest of 2021 and 2022. The latest MPR projects GDP growth of 5% in 2021 (previously 7.25%) and 7.25% in 2022 (6.25%). Ensuring that savings will boost investment and consumption will be critical for both the economy and GBP.” 

“UK’s encouraging covid vaccination rollout and the recent pullback in covid infections, still uncomfortably well above 10K per day, do suggest that the Government’s goal of beginning to unwind restrictions in mid-March is becoming more likely. If this also starts to release pent-up demand and savings, the growth prospects will also become more likely.” 

“GBP/USD now has potential to push towards 1.40 within a higher 1.3750-1.40 range near-term.”