GBP price, Bank of England, news and analysis:
- GBP/USD is looking technically weak but a near-term pause for breath is likely.
- That could be triggered by a Bank of England announcement that its monetary policy committee has ruled out a negative interest rate policy (NIRP) in the UK.
GBP/USD to steady after recent losses
GBP/USD has broken to the downside from a rising channel on the charts that has been in place since early last month, suggesting further losses to come. However, as the section at the bottom of the chart below shows, the RSI is now close to the 30 level that points to an oversold market, implying that at least a pause for breath is now likely, and perhaps a near-term rally.
GBP/USD Price Chart, 30-Minute Timeframe (January 19 – February 4, 2021)
Source: IG (You can click on it for a larger image)
The nudge that GBP/USD needs to steady after its recent falls could come from today’s announcements on interest rates and the UK economy from the Bank of England’s monetary policy committee and the Bank’s Governor Andrew Bailey.
The BoE will almost certainly keep Bank Rate at 0.1% but it has been consulting on the feasibility of a negative interest rate policy and the results are due today. Bailey may well argue that while NIRP is possible, more QE to boost activity is less risky. Moreover,while neither a rate cut nor more QE can be ruled out in future, and NIRP should not be ruled out as a policy tool, Bailey is not yet ready to move on monetary policy.
Ruling out NIRP for now would likely lead to a near-term bounce in GBP/USD, especially if the monetary policy report accompanying the MPC announcements points to the success of the coronavirus vaccine rollout in the UK. That has taken the pressure off the BoE to act now and indeed if the vaccination program is followed by an economic recovery the brighter outlook would point to no more rate cuts this cycle.
The announcements are due at 1200 GMT and Bailey’s press conference will begin at 1230.
Source: DailyFX calendar
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— Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.