GBP/USD: Traders Cautious Ahead of BoE Rate Decision
  • Pound (GBP) jumps after BoE distances itself from negative rates
  • BoE raises economic outlook
  • Euro (EUR) under pressure amid slow vaccine rollout
  • German factory orders

The Pound Euro (GBP/EUR) exchange rate is advancing for a second straight session. The pair settled +0.8% higher in the previous session at €1.1430 at the high of the day and fresh 9 month high. At 05:15 UTC, GBP/EUR trades +0.1% at €1.1438. The pair is on track to gain 1.3% across the week its 5th straight week of gains.

As expected, the Bank of England kept monetary policy unchanged in The Pound surged in the previous session after the Bank of England distanced itself from negative interest rates and upwardly revised the economic outlook. Whilst the central bank sees the economy shrinking -4.2% in the first three months of this year owing to the tighter lockdown restrictions.

However, policy makers expect a quicker rebound this spring owing to the rapid vaccine programme. The BoE sees the UK economy returning to pre-pandemic growth by the end of the year. Previously the assumption was that it would not return to pre-pandemic growth until the first quarter of 2022.

The central bank also released the results of its consultation into negative interest rates. The Bank has said that there are a tool which could be useful, but the bank will not be implementing them for now.

There is no major UK economic data to be released. Investors will continue digesting the BoE meeting.

The Euro has been under pressure in recent sessions despite upbeat data, as investors fret over the slow rollout of the covid vaccine on the old continent.

Eurozone retail sales were significantly better than forecast, yet investors shrugged off the upbeat data. Retail sales rose by 2% month on month in December, well ahead of the -5.7% decline in November and ahead of expectations of 1.2% growth.

The better than forecast numbers came after Eurozone GDP also beat forecasts earlier in the week.

Today German Factory orders will be in focus with a -1% month on month decline forecast.