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BOE monetary policy decision – Overview

It’s Super Thursday’ once again and markets brace for the first Bank of England’s (BOE) monetary policy decision of 2020, which will be announced at 1200 GMT, and will be accompanied by the release of the minutes of its policy meeting and Quarterly Inflation Report (QIR). The January meeting sees the post-policy press conference held by Governor Mark Carney, his last one as the head of the British central bank.

The BOE is widely expected to leave the benchmark bank/ base rate unchanged at 0.75%, with a 6-0 voting composition in favor of a status-quo. However, we could see one of the BOE monetary policy committee (MPC) switching in favor of a rate cut. This makes today’s policy meeting critical, as money markets now see a 46% probability of the BOE slashing rates this Thursday, courtesy the upbeat UK Manufacturing and Services PMI reports.

Amid bleak economic growth prospects and inflation well under the central bank’s 3% target, Carney and his company could very well hint that the next move in the rates could be downward. Also, Carney’s take on the post-Brexit trade deals and China’s coronavirus outbreak will be closely heard.

How could it affect GBP/USD?

Yohay Elam, Senior Analyst at FXStreet notes, “The Technical Confluences Indicator is showing that pound/dollar is hovering below 1.3019, which is the convergence of several lines including the Bollinger Band one-hour Middle, the Simple Moving Average 10-15m, the SMA 200-15m, the Fibonacci 61.8% one-day, and the SMA 10-1h. Further above, significant resistance awaits at 1.3059, where a dense cluster of SMAs awaits GBP/USD. These includes the 200-1h, the 50-4h, the 10-one-day, the 5-one-day, and also the Fibonacci 161.8% one-day.”

“Support awaits at 1.2972, which is a confluence of the Pivot Point one-week Support 1, the PP one-day S2, and the BB one-day Lower. Further down, the most significant cushion is at 1.2863, where the PP one-week S2 and the 100-day SMA meet,” Yohay adds.

At the time of writing, the cable erases losses and trades neutral around 1.3020 region, having witnessed a V-shaped recovery from a two-day low of 1.2978 reached in the last hours.

Key Notes

BOE Preview: Carney to cause carnage with a hawkish cut? Four scenarios for GBP/USD

GBP: knife edge? – Rabobank

BOE: Expect a dovish meeting with a 25bp cut – Deutsche Bank

About the BOE interest rate decision

BOE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.