UK Holds Benchmark Interest Rate at 0.1%

Bank of England recently announced the latest interest rate decision as the 9 members of Monetary Policy Committee(MPC) agreed unanimously to hold benchmark interest rate at 0.1%.

MPC also voted by a majority of 7:2 to keep bond purchase volume at 6,450 pounds, which was in line with market expectation.The 2 policymakers proposed to add another 100 billion pounds to the current bond purchase scheme.

BOC noted that buying bond with the present speed will make the government reach the upper-limit of the purchase scheme by July.

It’s estimated that the pandemic will cause a swift decline of British economy which is expected to be temporary, and the economy will slowly revive afterwards.BOC expected Britain’s GDP to shrink 25% in 2020’s second quarter, but up by 15% in the whole year of 2021.

Bank of England’s Governor Bailey expects that the impact of the epidemic on economic demand will continue for about a year after lifting the lockdown restrictions. From previous experience,increasing QE is a negative factor for the pound, because issuing more pounds will lead to depreciation of the currency.

GBP/USD daily pivot points: 1.2342-1.2362

S1: 1.2286 R1: 1.2439

S2: 1.2200 R2: 1.2505