How will the UK Lockdown affect the GBP

With the latest chatters over negative rates, coupled with a few months of no rate change, the Bank of England (BOE) is up for contributing to the “Super Thursday”. The routine interest Rate decision will be accompanied by the release of the minutes of its policy meeting and the Quarterly Inflation Report (QIR). To increase the importance of Thursday, UK Chancellor Rishi Sunak is also up for another stimulus announcement, to combat the economic woes due to the second national lockdown.

Looking backward, the British central bank held the key interest rate at 0.10% and Quantitative Easing (QE) program at £745 billion.

The latest inactions by the “Old lady” joins the fears of a double-dip recession for the British economy, due to the second broad-based coronavirus (COVID-19)-led activity restrictions, to hint at more downgrade in economic forecasts, like it did in the recent past. However, major market consensus doesn’t respect the Telegraph’s signal for negative rates while paying a little heed to talks of further QE.

Effect on GBP

While more is always on the table for all the central banks amid the current coronavirus (COVID-19) resurgence, the BOE is more likely to keep the interest rates on hold. Though, the “Old Lady” is widely anticipated to offer QE and/or cutting the quarterly economic forecasts. This could weigh tthe GBP pair  towards the south if the US dollar manages to stay depressed amid a light flow of the election updates.

Considering this, FXStreet’s Yohay Elam said, The BOE's decision comes amid the UK's second covid wave and could push it into announcing new stimulus. Negative rates would weigh on sterling while more QE will probably boost it. The US election result could have a substantial impact on GBP/USD's moves, even around the BOE's "Super Thursday" decision.

The cable stays depressed while taking rounds to 1.2960, down 0.23% on a day ahead of the London open. Although anticipated bearish BOE suggests the GBP/USD pair’s further weakness towards a six-week-old support line, at 1.2870 now, 50-day SMA near 1.2980 and the 1.3000 round-figure can restrict short-term upside moves.

 BOE interest rate decision

BOE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.