Let's go through a couple of takeaways from the BOE decision to start things off:
- BOE left its bank rate unchanged, maintains policy stance and QE
- Anticipates that the economic downturn is less severe than initially thought
- Upgrades its current year economic growth projection, makes mention to "high frequency indicators" showing spending has significantly recovered
- Makes mention to housing market activity returning to "close to normal"
- Expects inflation to be subdued, but anticipates a return to 2% in two years
- Says business investment remains weak and reaffirms a negative outlook on the labour market; expects 7.5% unemployment rate by year-end
- No specific mention of pursuing negative rates moving forward
The points that really stand out are that the BOE is reading recent data in a more positive light and they are not shy about making mention to that in their statement.
That is giving pound buyers more to chew on but much like what PMI data has offered us over the past few months, it remains to be seen if this pace of recovery can be sustained - especially since the furlough program is masking underlying conditions.
Cable rose from 1.3130 to a high of 1.3183 on the decision but is settling just under there, running into resistance from last week's high @ 1.3170.
Buyers are still firmly in near-term control, holding above the 100-hour MA (red line).
So, is the BOE statement here enough for buyers to extend the upside momentum?
There are glimpses of optimism but it isn't an overwhelming change to the current narrative in my view. The BOE is still largely in wait-and-see mode and the dollar side of the equation is still the key factor to watch for cable in the bigger picture.
For cable, the key level to eye will be the 9 March high @ 1.3200. Break above that and we can see the upside momentum run further. Keep below and there's still a lid that will cap gains as we slowly turn our attention to non-farm payrolls tomorrow.