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Forex News: Pound Advances After Dropping On BoE Rate Cut

Pound Advances After Dropping On BoE Rate Cut

03/11/2020 - 06:04:00 (RTTNews)

(RTTNews) - After initially falling in response to the Bank of England's surprise rate cut in the early European session on Wednesday, the pound rebounded against its major peers.

The Bank of England unexpectedly cut its key interest rate to contain the economic fallout from the coronavirus outbreak.

The Monetary Policy Committee unanimously voted to cut the bank rate by 50 basis points to a record low 0.25 percent, following a special meeting on March 10, the central bank said in a statement.

The MPC also voted unanimously to introduce a new Term Funding scheme with additional incentives for Small and Medium-sized Enterprises, or TFSME, financed by the issuance of central bank reserves.

"These measures will help to keep firms in business and people in jobs and help prevent a temporary disruption from causing longer-lasting economic harm," the central bank said.

The special measures were announced ahead of the budget presentation by Chancellor Rishi Sunak at 6.30 am ET.

The currency fell against its major rivals in the Asian session, with the exception of the dollar.

The pound appreciated to 0.8739 against the euro, after falling to a 5-month low of 0.8847 at 3:00 am ET. The pound was trading at 0.8736 a euro at Tuesday's close. The pound is seen finding resistance around the 0.85 mark.

The pound bounced off to 1.2955 against the greenback, from a 1-week low of 1.2827 seen immediately after the decision. At yesterday's trading close, the pair was valued at 1.2903. Next key resistance for the pound is likely seen around the 1.32 level.

Reversing from a low of 134.01 hit quickly after the BoE action, the pound rebounded to 136.30 against the yen. Should the pound strengthens further, it is likely to test resistance around the 138.00 region.

Having declined to more than a 6-month low of 1.1979 against the franc upon the BoE announcement, the pound turned higher and was trading at 1.2107. The pound-franc pair was worth 1.2131 when it ended deals on Tuesday. Further uptrend may take the pound to a resistance around the 1.24 area.

Looking ahead, the Chancellor of the Exchequer, Rishi Sunak, will present U.K. annual budget at 6:30 am ET.

In the New York session, U.S. CPI and monthly budget statement for February are scheduled for release.

For comments and feedback: contact editorial@rttnews.com

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