The Bank of England (BoE) has kept interest rates unchanged at 0.1%. The asset purchase facility remains at the previous rate of 645 billion pounds, and all votes on the size of the asset purchase program as well as the interest rate proper were unanimous. This decision has left the GBPUSD mildly higher at 1.20027 as at the time of writing.
In the accompanying statement, the BoE noted the downside risks posed by the coronavirus outbreak in the UK. Excerpts from the announcement are shown below:
“…little evidence as yet to assess the precise magnitude of the economic shock from Covid-19…”
“…probable that global GDP will fall sharply during the first half of this year…unemployment is likely to rise rapidly across a range of economies…”
The Bank of England is also anticipating “large and sharp” shocks to economic activity from the coronavirus in scale and duration. However, the bank is optimistic that reducing job losses and preventing business failures could make any such shocks temporary.
The statement is perceived as dovish and could ultimately affect short-term sentiment on the British Pound accordingly.
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Technical Outlook on the GBPUSD
Price is retreating from intraday highs at 1.20013. A look at the 4-hour chart shows that the GBPUSD is in a rising wedge pattern. Considering the pair’s previous bearish price action, the expectation is for the pattern to resolve with a bearish continuation of price action. If this plays out, then the GBPUSD could target the support levels at 1.1881 initially, followed by 1.17976 and 1.17389 as the pair aims for completion of a measured move from the pattern breakout point.
On the flip side, upward extension of price recovery invalidates the pattern and opens the door towards the 1.21761 price level, with 1.21210 being a potential pitstop.