GBP/USD soars after the BOE interest rate decision

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Dec 17, 2020
  • The GBP/USD rose after the final BOE interest rate decision of the year.
  • The bank left the interest rate and QE unchanged and pledged to do more.
  • This decision came at a time when the EU and the UK are yet to reach a Brexit deal.

The GBP/USD rose slightly after the Bank of England (BOE) delivered its final interest rate decision this year. This decision came a few hours after similar decisions by the Swiss National Bank (SNB) and the Federal Reserve.

GBP/USD
GBP/USD rose after the BOE decision

British pound index

BOE leaves rates unchanged

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In its final decision of 2020, the bank decided to hold fire as they continued to focus on the ongoing negotiations on Brexit. 

The bank left the interest rate unchanged at 0.1% and the limit of the quantitative easing program at £895 billion ($1.2 trillion). This decision came a month after the bank decided to add the ceiling of the purchases by £150 billion.

In a statement, Andrew Bailey, the bank’s governor, said that the committee was committed to doing more to offer support to the economy. This could include more rate cuts and asset purchases. He said:

“The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

The BOE decision came at a difficult time for the UK economy. Data released this week showed that the number of redundancies is increasing as more firms downsize. Also, yesterday, numbers showed that consumer prices have continued to drop, putting more pressure to the BOE.

Most importantly, the UK and the European Union are yet to reach an agreement, with time running out. As we have written before, a no-deal Brexit would have a catastrophic impact on the UK, which sells more than 40% of its goods to the European Union.

Further, London has moved back into a lockdown to prevent the spread of the virus and the number of bankruptcies has also continued to rise. Still, data released yesterday showed that the small manufacturing sector is continuing to fire on all cylinders.

Just last week, the European Central Bank (ECB) decided to add more funds into its QE program. And yesterday, the Fed left rates unchanged followed by the SNB that did the same today.

GBP/USD technical outlook

GBP/USD
GBP/USD technical chart

The GBP/USD pair continued rallying today after the BOE decision. It rose to a high of 1.3540, which is the highest it has been since 2018. It remains above the 25-day and 50-day moving averages. 

Similarly, oscillators like the Relative Strength Index and MACD have continued rising. This means that the pair will possibly continue rising as bulls aim for the next psychological level of 1.3600. You can learn how to conduct technical analysis in our free forex trading courses.

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