The GBP Remains Bearish Today, as BOE Saunders Leans on More Easing

Posted Thursday, May 28, 2020 by
Skerdian Meta • 2 min read

Yesterday the USD was pretty bearish, declining against most forex majors. But, the GBP turned even more dovish, with GBP/USD losing around 150 pips. There was no particular reason for that, since the economic calendar was quite light. But, it seems like markets knew that the situation would get worse for the GBP, with the Bank of England remaining on easing mode.

Today, BOE member Saunders confirmed that, saying that it would be better for the BOE to keep the monetary policy loose and tighten it later if the situation improves. Although I think think that the situation will improve, it will take a long time to recover completely from this abyss.

Comments by BOE policymaker, Michael Saunders

  • It is safer to err on the side of easing too much
  • And then tightening later if needed
  • Risks to the economy are to the downside
  • It is unlikely that data until June meeting would negate the case for further stimulus
  • But with limited policy space, there is less scope to get the economy back on track
  • Some recovery in economic activity is likely as lockdown eases
  • Sees risks of the UK falling into a ‘low-flation’ trap
  • The risks of a pickup in inflation are negligible

He’s making it clear that he will push for more QE in the June meeting and I reckon other policymakers will feel compelled to do the same as well. But his remarks on the inflation outlook are relatively dovish, i.e. current policy measures will stay for a long time.

He doesn’t make any major mention of negative rates though, besides a mention of the ‘neutral level of rates are inherently uncertain’. So, the GBP has turned bearish again today after a small retrace higher overnight and we will try to pick a place to open a sell signal in GBP/USD.

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Related Articles
0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments