Pound Rebounds After Bailey Cools Negative Rate Expectation
22 Settembre 2020 - 10:08AM
RTTF2
The pound recovered from its early losses against its major
counterparts in European deals on Tuesday, after Bank of England
governor Andrew Bailey played down hopes of taking interest rate
negative in the immediate future.
Speaking at a webinar hosted by the British Chamber of Commerce,
Bailey said that last week's BOE statement did not imply about the
possibility of using negative rate in the U.K.
"We have looked hard at the question of what scope there is to
cut interest rates further and particularly negative interest
rates."
The BOE governor said the use of negative rates in other
countries had a "mixed" outcome as its effectiveness relies on the
structure of the banking system and the timing of the move.
Bailey, however, asserted that a negative policy rate was part
of the central bank's toolbox and the central bank required to know
how to implement it.
European stocks rebounded after suffering their biggest drop
since June the previous day on concerns over coronavirus
restrictions and diminishing prospects for economic stimulus.
Fed Chair Jerome Powell and U.S. Treasury Secretary Steven
Mnuchin will speak later in the day at a Congressional panel.
The pound rose to 134.39 against the yen, after dropping to a
2-1/2-month low of 133.05 at 3:45 am ET. If the pound rises
further, it may challenge resistance around the 138.00 level.
The pound appreciated to 1.2867 against the greenback and 1.1763
versus the franc, up from its early European session's 2-month low
of 1.2712 and a 1-week low of 1.1655, respectively. Next near term
resistance for the pound is seen around 1.31 against the greenback
and 1.19 versus the franc.
The U.K. currency turned positive against the euro, with the
pair trading at 0.9144. This followed a 1-week low of 0.9220 set at
3:45 am ET. The pound is likely to find resistance around the 0.90
level.
Looking ahead, Eurozone flash consumer sentiment index for
September is set for release at 10:00 am ET.
Simultaneously, U.S. existing home sales for July will be
featured.
At 10:30 am ET, Federal Reserve Chair Jerome Powell will testify
on the the CARES Act before the House Financial Services Committee
in Washington DC.
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