Earlier today, the Monetary Policy Committee (MPC) of the Bank of England quite unsurprisingly decided to maintain the Official Bank Rate unchanged at 0.10 per cent. The decision came after a unanimous 9-0-0 vote by the Committee.
Additionally, the MPC agreed to ramp up its monetary policy stance by expanding its underlying Asset Purchase Facility. In doing so, the BOE decided to run alongside the RBA, which implemented similar actions earlier this week. This means that major central banks are all seeing the same challenges to global growth.
"The Committee voted unanimously for the Bank of England to continue with the existing programme of £100 billion of UK government bond purchases, financed by the issuance of central bank reserves, and also for the Bank of England to increase the target stock of purchased UK government bonds by an additional £150 billion, financed by the issuance of central bank reserves, to take the total stock of government bond purchases to £875 billion."
The decision to scale up the overall liquidity that is currently being pumped up by the BOE was ultimately reached following the reintroduction of lockdown measures in large swaths of the UK, coupled with the uptick of coronavirus cases.
The news bolstered the value of the pound in the short-term, even though the longer-term projections remain tilted to the downside.
As can be seen on the daily chart below, the GBPUSD continues to advance within the boundaries of an ascending channel (flag), after having previously completed the establishment of a major 1-5 bullish impulse wave pattern.
After having recently rebounded from the 100-day MA (in blue) and broken out above the psychologically significant 23.6 per cent Fibonacci retracement level at 1.30000, the price action is likely to continue with its ascent towards the upper boundary of the channel.
Once the momentary bullish sentiment is exhausted, however, the price action is likely to revert itself as bears regain control, and head lower towards the 38.2 per cent Fibonacci at 1.26961.