Last week, the Bank of England (BoE) dismissed readiness to adopt negative rates with a gradual QE reduction while outlining the potential for an economic rebound fueled by the launch of the vaccines. GBP / USD now appears poised to move towards 1.40, in the opinion of Westpac economists.
Key Comments:
“The Bank of England policy meeting and the monetary policy review last week affirmed the accommodative stance of the Monetary Policy Committee while the UK faces a double dip recession due to the current strict lockdown. Nevertheless, the monetary policy review also established factors that could lay the foundations for a strong recovery through the remainder of 2021 and 2022. The latest revision of monetary policy projects GDP growth of 5% in 2021 (previously 7.25%) and 7.25% in 2022 (previously 6.25%). Ensuring that savings will drive investment and consumption will be critical both for the economy and for the pound sterling ”.
“The encouraging launch of covid vaccination in the UK and the recent setback in coronavirus infections, which are still well above 10,000 a day, suggest that the government’s goal of beginning to remove restrictions by mid-March is increasingly likely. If this also starts to release pent-up demand and savings, the growth prospects will also be more likely. “
“The GBP / USD now has the potential to advance towards 1.40 within a higher range of 1.3750-1.40 in the near term. “
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