In addition to the other important economic data, which is awaited by the market participants this week, the Bank of England will make monetary policy decisions on Thursday. This will be the first meeting of the Central Bank after the UK referendum where the country voted to leave the EU.
At the beginning of this month, Governor of the Bank of England, Mark Carney said that the summer, some monetary policy easing will be required in the UK. The speech of by Mr. Carney caused the decline in the pair GBP/USD to lows reached on the "black Friday", when the results of the referendum became known. Last week Central Bank of Great Britain warned that the prospect for stability in the financial system is under threat after the referendum. The head of the Central Bank also said that there are signs that foreign investors are withdrawing money from the British stock markets and commercial real estate markets.
The Bank of England has also lowered capital requirements for the British banks, which should help to increase lending to companies and households. This decision precedes the anticipated reduction in the interest rates. Many economists also predict that the Bank of England will resume assets purchase program, which was cancelled in 2012.
At the same time the Bank of England believes UK’s economy is now stronger than it was in 2008 and 2009. Bank’s Governor Mr. Carney said that the fall in the Pound was necessary in order to adjust economy after the referendum. The decline of the national currency should boost exports and the economy of the country.
At the moment the Pound is traded at the lowest levels in the past 30 years. Nevertheless, it is obvious that the market's tendency to sell the pound continues. This trend is associated with the issue of the interest rates in the UK, and increasing risks of a recession in the country. Interest rate decision by the Bank of England will be known on Thursday, at 13:00 (GMT+2).