04/02 – Bank of England to remain ambiguous on negative rates

04/02 – Bank of England to remain ambiguous on negative rates

GBP: Bank of England meeting at noon

EUR: Breaks to near 2 month low

USD: Vaccine news helping recovery story


It is Bank of England day and for a number of people this meeting, alongside the Monetary Policy Report that accompanies it, represents a chance for a decision on the BOE’s thoughts on negative interest rate policy, one way or the other.

Comments from Monetary Policy Committee members have erred on the side of caution but we feel that everyone looking for a definitive one-way-or-the-other on negative rates need to remember that central banking is all about constructive ambiguity at the moment; no central bank is ruling anything out at the moment. In this market, if you’re looking for certainty, you’re asking to be deceived.

As former Fed Chair Alan Greenspan once said “I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I said.”

So how does sterling react?

Sterling’s move lower into the meeting could easily be bought back by a market that decides that a small risk of negative rates can be ignored, especially if the Bank is vocal on the relationship between vaccination pace, lockdowns ending and a recovering economy.

In the wider scheme of events, the Bank will be more than happy to offload the stimulatory burden to the Chancellor and his upcoming Budget.


EUR is creaking this morning against the USD and has broken below the 1.20 level this morning for the first time since early December. The story against the pound is not so poor but a hawkish Bank of England meeting would be enough to reverse this trend.

The risks to the euro are only beginning and we have held today’s European retail sales and tomorrow’s German factory orders up as reasons to remain bearish the single currency this week as we believe they could be the key to further losses.


Dollar strength has remained the main story in currency overnight with the USD rising as investors cheered good US data and what it means for the wider US economy. Friday is Jobs Day in the US and a strong rebound in employment would be enough to push the USD towards a one month high on a trade-weighted basis.

Local positive vaccine news has also been held up as a reason that some may be happy to get long the USD as well; such a move is clearly seen in EURUSD given the issues that the European bloc has had with its vaccination efforts.


Market participants are watching both the NZD and AUD for signs of a potential breakout higher in the coming sessions. Both are bumping their heads up against their recent trends with breakouts opening up potential clear space for appreciation against the USD.

Have a great day.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.