2016-08-05 12:29:15

After Brexit economic growth in the UK has slowed. On Thursday the Bank of England has downgraded economic growth forecast for the next year to the lowest historic level. According to the Bank of England, economic growth in 2017 will be 0.8% against 2.3% expected earlier.

As expected, on Thursday the Bank of England also cut the key interest rate to a record low of 0.25%. This was the first decrease in rate since 2009. The interest rate reached the lowest level in three centuries. British Central Bank plans to purchase government bonds for the amount of 60 billion pounds and corporate bonds for the amount of 10 billion pounds. It is also planned to give commercial banks cheap four-year loans.

In response to the decision of the Bank, the yield of 10-year government bonds fell to the record level of 0.644%, but then slightly regained. Yesterday, the index FTSE100S has grown higher than all other world stock indices. FTSE100S has grown by 1.6% against the decline over the past 6 trading sessions in a row.

On Thursday closing price of the pair GBP/USD fell by 1.7% at the level of 1.3100. The pound also weakened against major currency pairs. Today the pair GBP/USD slightly regained; however, the pound remained under pressure.

Investors' attention today will be focused on the release of the US labor market data for July, which will be released at 15:30 (GMT + 3). It is expected that the data will be positive. It is assumed that the number of new jobs created outside US agricultural sector (Non-Farm Payrolls) in July will be 180.000. Unemployment rate will decrease by 0.1% to 4.8. Labour market data will indicate the possible timing of interest rate increase by the US Federal Reserve System. This data will affect the USD and the US stock indices in the short and medium terms.

GBP/USD: The Bank of England has lowered interest rate to the record lows of 0.25%. Fundamental analysis for 05/08/2016.