GBPZAR jumps to three-month highs after the BoE sends a bullish sign for British pound traders. Positive sentiment builds around pound after the BoE statement. The improvement in central banks forecasts, faster than expected economic recovery, and taking out the negative rates would be GBP positive in the upcoming sessions. Meanwhile, the emerging currencies are under selling pressure across the board.
Bank of England Keeps Rates At 0.1%
The Bank of England earlier today with a unanimous decision kept the interest rates unchanged, as was expected by markets, at record low levels of 0.1% and left the asset bond purchases programme unchanged.
The central bank changed it’s May projection and now expects the UK economy to contract by 9.5% this year, before returning to growth by 9% in 2021. The previous forecast by the BoE was for a GDP contraction of 14%. Bank of England (BoE) warned that the unemployment rate would remain high around 7.5% this year. The inflation rate expected to be subdued and will reach 2% in two years.
Regarding negative interest rates that are on the headlines the last quarter, the central bank is reviewing that scenario but said that negative rates would further weaken the UK banking sector more, thus destabilizing the already fragile UK economy.
On the economic data, the better than expected news from the UK continues. The United Kingdom Construction PMI reported at 58.1, beating the expectations of 57 in July.
GBPZAR Technical Analysis
GBPZAR is 1.40% higher at 23.0355 making fresh three month highs as the rally that started since July 22 accelerate after the pair breached above the 100-day moving average the previous week. The technical outlook is clearly bullish, and an attempt to yearly highs is possible.
Initial resistance for GBPZAR stands at 23.2562 the daily top. Next hurdle would be met at 23.6060 the high from May 4. Next supply zone is at 23.7181.
On the other side, the first support is at 22.6429 today’s low. More bids would emerge at 22,3822 the low from August 4 trading session. The 100-day moving average at 21.9796 would provide the next critical support zone.
GBPZAR Daily Chart