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The incoming Governor of the Bank of England Bailey would like to see what the Chancellor of the Exchequer has to offer at the March 11 budget before making a decision as to any monetary policy change. Another factor for the GBP outlook is the talks between the EU and the UK on their post-Brexit relationship, according to analysts at Rabobank.

Key quotes

“The incoming Governor of the Bank of England Bailey suggested that an immediate policy move from the BoE may not be on the cards. The possibility of a brief delay in a BoE rate cut has allowed GBP to edge back to firmer levels.”

“The UK budget was expected to be focussed on ‘levelling up’ and ‘unleashing’ the UK economy. There are now reports that it will instead focus on measures aimed at protecting and supporting parts of the economy most likely to be affected by a coronavirus epidemic.” 

“Given the risks that the BoE will cut rates this month, the pound’s respite could be temporary.”

“The threat made by PM Johnson that he would be prepared to walk away from the talks and open the UK to WTO rules on trade at the start of next year, is likely to keep GBP investors worried.” 

“We expect GBP/USD to trade mainly below 1.30 on both a 1 and 3-month view.”