Breakdown of the latest developments on the global exchanges
Feb 4, 2021, 2:16 PM GMT

BOE Did Not Scale Up Its Asset Purchase Facility, As Vaccinations Top 10 Million

Bank of England with flag, The historical building in London, UK

The Monetary Policy Committee (MPC) of the Bank of England expectedly decided to maintain the Official Bank Rate unchanged at 0.10 per cent at its January meeting earlier today.

The Committee also deemed it unnecessary to ramp up its asset purchase facility at the present moment, similarly to FED's course of action from the start of 2021. Consequently, BOE's envelope of net purchases was maintained at £895 billion.

The decision was reached despite the contraction of global growth in Q4, and the recently observed increase in British unemployment. Part of the optimism stems from the fact that Britain has already vaccinated more than 10 million people, which is hoped to allow economic activity to resume picking up.

In the monetary policy statement, it was also noted that:

"The Committee’s projections for activity and inflation are set out in the accompanying February Monetary Policy Report. Covid-19 (Covid) vaccination programmes are under way in a number of countries, including the United Kingdom, which has improved the economic outlook. Nevertheless, recent UK and global activity has been affected by an increase in Covid cases, including from newly identified strains of the virus, and the associated reimposition of restrictions. The United Kingdom and European Union also announced a trade agreement, which has applied since 1 January 2021."

BOE's monetary policy decision strengthened the pound in the short term following today's major breakdown on the GBPUSD. As can be seen on the 4H chart below, the price action surged by nearly 0.75 per cent immediately following the publication of MPC's statement.

The underlying price action is currently testing the strength of the emerging channel's upper boundary, as well as the minor resistance level at 1.36500. The 100-day MA (in blue) represents a floating resistance, and final barrier before the bulls regain control.

Meanwhile, the recent breakdown below the Triangle's lower edge signals the likely continuation of the downtrend's further development. In contrast, there could be an uptick in bullish momentum, as indicated on the MACD.

GBPUSD 1H Price Chart