The Bank of England today held interest rates steady as England enters a new period of national lockdown measures expected to hit the country’s economic recovery.
Along with maintaining its main lending rate at 0.1%, the Bank of England’s (BOE) Monetary Policy Committee (MPC) also voted to increase its target stock of asset purchases to £895 billion.
Last month, the BOE asked British banks about how prepared they were for negative interest rates, having revealed in September that it was exploring the possibility of taking rates into negative territory if necessary.
Since the pandemic there has been two rate cuts from the BOE taking the base rate down from 0.75% to 0.1%. The British economy grew 2.1% in August, according to figures released last month by the Office for National Statistics, having suffered a severe 19.8% reduction in the second quarter during the height of nationwide lockdown measures. The BOE have projected that 2021 GDP will increase by 7.25%, revised down from the 9% anticipated at its August meeting. In 2022 however, GDP is expected to grow 6.25% against the 3.5% seen in August.
With cases increasing rapidly once again, Prime Minister, Boris Johnson has announced a new lockdown, running in from Thursday to December 2. Yesterday , 492 people died in the U.K. from the virus, the highest daily death toll since 19th May, while 25,177 new cases were confirmed.
The government has also extended its furlough scheme to help side-lined workers, with the BOE now expecting unemployment to peak at 7.75% in the second quarter of 2021.
This does not bode well for Sterling although Brexit will remain the key driver for GBP. As the changes stated above have done little to alter Sterling value.
Biden remains in the lead as crunch time approaches although Trump is saying that there must be recounts in specific states and it is rumoured his case may be legitimate. High drama as the election reaches it’s finale.
At present Biden leads 264 to Trumps 214. There has been no great shakes on GBP/USD at this point and I would not necessarily think we will see huge volatility on the market when the result is announced despite the importance of the election. It has been rumoured that a Trump victory would have a more positive outcome for Sterling in the event of his victory dure to his open willingness to get a trade deal in place with the UK. Biden has said a trade deal with the UK is not at the forefront of his plans so this does have the potential for some GBP weakness.
The market moves on rumour as well as fact and it is likely that the exchange rates are reacting as votes land rather than as mentioned earlier a large amount of volatility when the result is announced.
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