The Bank of England gave a mixed outlook in their latest policy decision yesterday – noting that they forecast a rapid recovery for the UK economy; but also downgraded its growth outlook for the year as a whole. The quarterly monetary policy report stated that “GDP is projected to recover rapidly towards pre-COVID levels over 2021, as the vaccination programme is assumed to lead to an easing of COVID-related restrictions and people's health concerns". The bank also revaluated its growth projections for 2022, upgrading from 6.25% to 7.25%.
As markets awaited the latest interest rate decision from the BoE yesterday, GBPUSD was weak as the markets demand for the U.S. Dollar continued. Cable opened Thursday at 1.3588, and after the UK central bank kept rates on hold, Sterling was able to gain some upside. The pair closed at 1.3663.
GBPEUR also managed to move higher as the BoE kept rates on hold. The pair started Thursday at 1.1325, and soared beyond the 1.14 handle during the session, closing finally at 1.1410.
It was a tough day for the single currency, with EURUSD also taking a tumble. Opening at 1.1998, an increase in Dollar demand helped push the rate lower and caused the pair to struggle throughout the day. After a volatile session, the pair closed at 1.1410.
Having had time to analyse the necessary data, the BoE now collectively believe the collapse in the economy was not quite as bad as once predicted. While the bank predict the UK has avoided a double-dip recession, latest calculations show that the economy has contracted by 10% as opposed to 11% (the previous forecast). Governor Andrew Bailey stressed the importance of the vaccine and the role it will play in the country’s recovery. He said that the speed and efficiency at which the vaccine has been rolled out the UK “has improved the economic outlook”.
