GBP/USD: BoE sends sterling lower with support at 1.2375 – TDS

FXStreet notes that the BoE left rates on hold and announced an additional £100bn of QE, as had been expected, but with a hawkish tilt. Despite a brief flirtation with post-announcement gains, cable has turned lower in the aftermath of today’s MPC decision and economists at TD Securities think the pound may underperform its peers further from here.

“The Bank of England left its policy rate on hold today at 0.10%, as had been unanimously expected. On QE, it delivered the additional £100bn that markets had been looking for, though in a surprise 8-1 decision that had Haldane, the Chief Economist, dissenting in favour of no further QE.”

“Given the steeper slowdown in the pace of QE, we now look for the BoE to wait until November before announcing an additional £50bn of QE, likely to run though H1 2021. Although if the unemployment rate does creep toward 15%, a risk that we've highlighted, that could see the BoE speeding up the pace of QE instead.” 

“GBP's knee-jerk reaction was to rally in response to the more-hawkish tone seen at today's MPC meeting. However, cable's push higher ran out of steam around the 1.2550 mark. Selling pressure has intensified since, sending spot sharply lower toward support around 1.2450.”

“Below significant support at 1.2450, we think the next attractor lower would arise around the 1.2375 mark. Below that, we think markets would set their sights on a test of 1.2295.”