BoE: Bailey gives sterling three reasons to rise

The Bank of England (BoE) expanded QE by more than expected, allowing for a quicker recovery. The central bank’s open commitment to additional bond-buying is also positive while refraining from setting negative rates leaves this option further in the distance, FXStreet’s Analyst Yohay Elam briefs.

Key quotes

“The BoE has announced an additional £150 billion in bond buying – exceeding £100 billion projected. The total is now £895 billion, more than double the pre-pandemic level of £435 billion. The gradual increase lowers the government's borrowing costs and comes right on time – on the same day that England enters its second lockdown.”

“BoE Governor Andrew Bailey and his colleagues stated that the bank is ready to do more. Such a move is also significant as the UK could face a third shuttering in a long winter. Moreover, uncertainty about global growth remains significant. The promise compounds the better-than-expected QE.”

“Bank officials have publicly contemplated setting sub-zero borrowing costs and also announced they are examining its implementation. However, the November decision has been their chance to announce it. In addition to the decision and the accompanying meeting minutes, the BOE has released its quarterly Monetary Policy Report which includes new economic assessments. While the bank sees risks to the downside, these are probably insufficient for such a drastic step. Investors may now think – if it has not happened now, it is probably off the radar for a long time.”