On the release of Bank of England’s announcement, some of the forex pair was seen to have been heavily affected by the said announcement on rates. The Bank of England decided to leave the bench mark rates unchanged at 0.25%. More so, the reports for May policy seemed to have more negatives than expected.
According to reports, BoE reported more bad news than expected as Manufacturing Production unfortunately dropped to 0.6% which was considered worse than the expected -0.2%.
On a positive note, US data was deemed strong, as PPI moved up to 0.5%, and unemployment went down to 236 thousand respectively, beating analysts’ expectations optimistically.
On its trading perspective, GBP/USD plunged deeply in last week’s trades. In its weekly performance, it opened at 1.2973 just to drop further to 1.2886 consequently. It had a high of 1.2990 and a low of 1.2845.
As for the other indicators, RSI level seemed to be falling deeper as well. Last week’s was at 57.51 which was a drop from 59.86. Oppositely, Coppock Curve continued its uptrend further and was at 6.20 last week.
A Deeper Look on BoE’s May Policy
The Bank of England as aforementioned had decided to leave the rates unchanged. Conversely, the BoE pronounced in its announcement that it estimated living standards to plunge, as it lowered its estimate for average earnings development to 2%, down from 3%.
As for the inflation rates, the BoE upturned its forecast for inflation in Q1 to 2.7% from to 2.4% in February. BoE also said that if the inflation rate went higher than expected, it will strongly affect the raising interest rates.
Additionally, the Bank of England’s annual costs will be elevated to £632m which is aimed for “an allowance for pension volatility”, as stated by the minutes issued this month about the February meeting of the BoE’s court of law.
The minutes also stated that the further workforce around Brexit would correspondingly escalate costs at the BoE, solely due to the “likely additional demands on technical resources arising from EU withdrawal work”.
Also, the minutes added that these forecasts were based on a “smooth” Brexit which is in no way assured, particularly with the opposition between the EU and Theresa May, the Prime Minister.
In effect, the bad news that BoE just announced had pulled down the British pound lower in its general performance, counting the manufacturing report that also weighs down the pound. According to BoE, if these data missed on meeting the expectations negatively, the pound will certainly drop further.
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