GBP/USD rose from 1.2325 to a high of 1.2382 before backing off a little
A couple of key takeaways from the BOE policy decision earlier:
1. Two members dissented on maintaining current QE stance, wanting more
2. BOE outlines that QE target will be met by July at current pace
3. Bank rate assumed at 0.10% through next year, to increase to 0.20% in 2022
4. Inflation to be subdued all through next year, to return to 2.0% in 2022
5. Expects UK GDP to slump by 14% this year, followed by a 15% rebound next year
As such, the next key move by the BOE looks to be more QE and it will surely come considering that they will be meeting their purchase target soon enough.
While easing policy may seem bad, it is much needed to bolster financial conditions and that is what matters here. The BOE isn't going nuclear just yet, so another increase of £100 billion should not eat away at the pound all too much in the short-term.
Meanwhile, the illustrative scenario outlined by the BOE does seem a tad optimistic. A rate hike and a return to 2% inflation in 2022? That is quite something to behold.
But again, do be reminded that this is just a forecast that hinges on a host of assumptions.
I reckon the combination of all of that is helping to keep the pound a little higher in the knee-jerk reaction to the policy decision.
As for cable, despite the jump, not much has really changed. Price action is still keeping under 1.2400 and the key hourly moving averages. Hence, sellers are still in control.
Key downside support is still seen closer to 1.2300-10 and so buyers and sellers will have to do battle in between these ranges for now to determine the next trending move in the pair.
