MAY 7, 2021
- BoE reduced pace of QE
- No conclusion on cutting back on QE yet
Chart 1: GBP/CAD D1 chart
During the monetary policy meeting yesterday, the Bank of England (BoE) held interest rate unchanged at 0.10% and kept its Asset Purchases Programme unchanged at £895 billion. The central bank expects economic growth in the UK to recover to pre-COVID levels this year while inflation is expected to rise above the the central bank 2% target temporarily due to rising energy prices. As a result of its optimistic view on the UK economy, the BoE will be slowing down the pace of asset purchase from £4.4 billion pounds a week to £3.4 billion pounds a week between May and August.
Just when the market is celebrating on the central bank’s hawkishness, BoE Governor Andrew Bailey highlighted during the press conference that the slowdown in asset purchase does not imply a change in monetary policy stance. Furthermore, he also said that the central bank has not reach any conclusion on cutting back on its asset purchase. As a result, pound returned its gains.
The Canadian jobs report that is due for release later at 2030 (SGT) is expected to indicate a loss in jobs and a slight rise in unemployment in April due to the lockdown in Ontario Canada. If the released data is not as poor as forecasted, the market may downplay the data and GBP/CAD may continue trending downwards.
Trade Setup for GBP/CAD (D1)
Sell Stop Order at 1.67700
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