In an emergency meeting held this afternoon, the Bank of England (BoE) has delivered a rate cut to send the interest rates to an all-time low of 0.1%.
Here are excerpts from the BoE’s statement explaining today’s action:
- conditions in the UK gilt market have deteriorated
- At its special meeting on 19 March, the MPC judged that a further package of measures was warranted.
- Voted unanimously to increase the Bank of England’s holdings of UK government bonds and sterling non-financial investment-grade corporate bonds by £200 billion to a total of £645 billion.
- Purchases to be financed by the issuance of central bank reserves
- Bank Rate reduced by 15 basis points to 0.1%.
- Bank of England to enlarge the TFSME scheme, financed by the issuance of central bank reserves.
- Majority of additional asset purchases will comprise UK government bonds.
- Purchases announced today will be completed as soon as is operationally possible
The GBPUSD is trading in a choppy, tight range around 1.1650 as markets digest the latest central bank action, which is the 2nd time the BoE will cut rates this month.
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Technical Outlook for GBPUSD
After crashing to 35-year lows, the GBPUSD is starting a slow recovery with price now targeting the October 2016 and September 2019 highs at 1.20005. Further improvement in price which breaches this level to the upside opens the door towards 1.21761 and possibly 31 December 2018 lows at 1.23695.
On the flip side, sellers may decide to look to sell om rallies, which could target this week’s lows at 1.14477. Anything below this would push the GBPUSD into lows not seen in its trading history dating back to 1971.
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