European Central Bank and Bank of England tell same old story
It’s the same old story from Bank of England and European Central Bank…
It’s as you were for interest rates in the United Kingdom and the European Union – and it could be that way for some time.
During recent monetary policy meetings for both the European Central Bank (ECB) and Bank of England (BoE), both declared that interest rates would remain unchanged, as well as quantitative easing measures.
The MPC says, “Any future increases in Bank Rates are expected to be at a gradual pace and to a limited extent.”
Whilst it’s unlikely that the Bank of England will head for negative interest rates anytime soon, the Bank stated that they would instate the change if deemed necessary.
Meanwhile, the Governing Council of the European Central Bank (ECB) left the headline cost of borrowing, its refinancing rate, at 0% and its deposit facility at -0.5%.
The central bank explained, “The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time.”
David Johnson, founding director at Halo Financial, says, “Both results followed market expectations, without major shifts in the exchange rates for the British pound (GBP) or the euro (EUR)
The MPC stated that the UK economy would make a strong recovery, though still maintained a cautious tone. It was also stated that UK unemployment would not be as severe as previously predicted.
UK net trade has been bolstered by the strong global expansion and the past depreciation of Sterling. Business investment, while affected by uncertainties around Brexit, is projected to continue to grow at a modest pace, supported by strong global demand, high rates of profitability, the low cost of capital and limited spare capacity.
UK inflation fell 0.4% last month and Samuel Tombs, chief UK economist at Pantheon, stated that despite a sudden drop due to temporary weakness in clothing prices, and expects the rate to exceed 2% later this year.
The euro (EUR) currently remains strong against Sterling despite a third wave of coronavirus cases in the EU. The British pound to euro (GBP/EUR) exchange rate stands at EUR 1.17 whilst the euro to US dollar (EUR/USD) exchange rate stands at USD 1.18.
EU meet to discuss future of coronavirus vaccines
Today, leaders from all 27-member states of the European Union (EU) will meet to discuss vaccination supplies and how to improve the EU’s sluggish vaccination campaign. The EU is well behind the UK in its vaccination efforts as it’s confirmed that over 28 million UK citizens have received the first dose of the coronavirus vaccine.
British pound (GBP) investors will be eager to hear comments regarding whether the EU will cease vaccine exports to the UK, which will likely cause disruption to the vaccination programme.
Head of the European Commission, Ursula von der Leyen, tweeted that the EU leaders would “ensure that Europeans get their fair share of vaccines”. It was also mentioned that the EU had exported around 77 million doses to 33 countries since last December, which makes the EU the world’s largest vaccine exporter.
Whilst the situation has caused great amounts of tension between the UK and EU, leaders of the bloc have called for unity during today’s summit. European Parliament President David-Maria Sassoli stated, “the more unity we show, the more trust we will inspire.”
The EU has been critical of the AstraZeneca vaccine, stating that insufficient doses have been sent to the EU and argued that the UK is receiving preferential treatment with supplies.
As the bloc meets on Thursday evening, the British pound (GBP) is likely to be heavily impacted by the developments of the meeting.
British pound benefits from Boris Johnson’s comments
Whilst the British pound (GBP) has been undoubtedly struggling against its major currency competitors over recent weeks, today saw Sterling benefit from recent comments made by Prime Minister Boris Johnson that he was committed to the UK’s roadmap, noting the plan was cautious yet irreversible.
At the end of this month, the UK will be able to meet in groups of six or two households outdoors before the reopening of non-essential businesses from 12th April. In line with the BoE’s comments, the UK is set to make a strong recovery once businesses reopen as people of the UK are eager to go out and socialise once again.
As a result, it’s forecast that the British pound (GBP) will recover its recent losses against the majority of its currency rivals as the roadmap out of lockdown progresses.
For now, Sterling awaits this evening’s comments from the EU which will determine the course of the UK’s vaccination programme.