GBP Rate Rebounds on BoE Release As Euro Caves In

Azeez Mustapha
4 February 2021 | Updated: 4 February 2021

Sterling jumped sharply after the Bank of England indicated that it does not want to signal the market to move to negative rates. The dollar is also resilient in the overall mixed market sentiment. With a sell-off against both the pound and the dollar, the euro is currently performing its worst per day, followed by the Swiss franc.

As for the week, the strongest of them are Kiwi and Dollar, but Sterling has every chance to overtake them. The Euro and the Swiss are relatively unlikely to move from the bottom.

The Bank of England, as expected, left its monetary policy unchanged. The Bate rate is held at 0.10%. The overall target for asset purchases also remained at £ 895bn. Both decisions were taken unanimously.

The Bank of England minutes noted that “It was clear to the Committee that it did not want to give any signals that it intends to set a negative bank rate at some point in the future.” Although, in general, “it would be advisable to start preparations to provide an opportunity to do so if required in the future”,

Therefore, the MPC agreed to require the PRA to engage with PRA-regulated firms to ensure that they begin preparations to be ready for a negative bank rate at any time after six months,” the minutes said.
Euro Caves In, As Slide Continues
Nearly hitting 1.2350 in January, the euro fell below 1.20. The macroeconomic outlook for the eurozone has been hit by the disappointing vaccine rollout, and this gloomy assessment could still cause some additional problems for the euro.

Eventually, the dollar will lose its crown and unprecedented financial and monetary measures will put pressure on the currency. The EUR/USD currency pair could easily test 1.19 this week, but the bearish decline should exhaust itself towards the 1.17 area.

Markets are eagerly awaiting Mario Draghi to lead Italy, Europe’s third-largest economy. The slow delivery of the coronavirus vaccine in the eurozone could also contribute to a negative impact on the situation. Euro traders ignored increased price pressures in the euro area in January.

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Azeez Mustapha

Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.