2016-07-15 11:14:16

The decision to leave interest rate in the UK at 0.5% adopted by the Bank of England surprised participants of the financial market, as they expected that the Bank of England would lower interest rate after the exit of the UK from the EU. Asset purchase program was also left at the level of 375 billion pounds. In the following up comments the Bank of England said that the majority of the Monetary Policy Committee (MPC) of the Bank of England expects monetary policy easing in August.

In this regard it will be interesting to hear the speech by the Bank of England Governor Mark Carney, which is scheduled for today (14:00 GMT + 2). After the UK referendum Mark Carney said that more monetary policy easing will be required in the country in the summer. He also said that the easing could be introduced at the next meeting of the bank. However, it turned out that the summer and the next meeting – did not mean in July. On the bank's decision to leave interest rates unchanged at the Pound sharply fell in the currency market, especially against the Yen and the USD, and also against the New Zealand dollar. The NZD sharply declined yesterday after the news that RBNZ would present a new assessment of the economic situation in New Zealand on July 21 and alos due to the changes of the financial conditions in the country because of the developments in Europe associated with Brexit.

Yesterday, the pair GBP / USD has grown by 200 points. In our yesterday's review, we mentioned that "if the Bank of England leaves the interest rate unchanged at 0.5%, the Pound will rise sharply. The pair GBP/USD can grow by 200 points." On yesterday’s decision the pair soared up by 330 points yesterday, up to the opening level, but then fell, closing yesterday's trading day at the level of 1.3340, on the news from the Bank of England that "the majority of the committee expects more monetary policy easing in August."

With the opening of today’s trading day the Pound continued the rally, but at the opening of the European session, the Pound and the pair GBP/USD are going down. Now, many economists expect that in August the Bank of England will lower interest rates by 25 basis points, to 0.25% and will increase quantitative easing program by 100 billion pounds, up to 475 billion pounds, although these measures can be implemented in several steps.

Expectations of more monetary policy easing in August, uncertainty about future prospect for the British economy after Brexit can prevent further rise in the Pound.

It is highly probable that yesterday’s high at the level of 1.3480, can be just a local level and the pair GBP/USD will continue to decline to 31-year lows at the levels of 1.2900 and 1.2800. GBP/USD: Decision of the Bank of England surprised investors. Fundamental analysis for 15.07.2016