CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Bank of England rate preview: inflation report brings fresh economic forecasts

The Bank of England meeting looks likely to focus on the forward guidance and inflation report forecasts as we look towards a meeting devoid of quantitative easing or interest rate changes.

When and where?

The Bank of England (BoE) will conclude their latest virtual monetary policy meeting at midday, on Thursday 6 August 2020.

Will we see any change to monetary policy?

The Monentary Policy Committee (MPC) are unlikely to make any change to their current monetary policy stance, with the £100 billion rise in asset purchases seen at the last meeting (in June) ensuring that we are expecting to see quantitative easing (QE) stay steady this time around. From an interest rate standpoint, markets pricing points to a 97% chance that we will see the BoE keep the bank rate steady at 0.1%.

Commentary will be key

Monetary policy has seemingly taken a breather over the past month, with the likes of the US Federal Reserve (Fed) and Royal Bank of Australia (RBA) highlighting how central bankers appear to be holding off until we have a better idea of where this economic rebound ends. From a US perspective, the potential for a major fiscal withdrawal raises major questions that the Fed will be keenly following.

Meanwhile, the BoE will be aware of the potential implications that come with the withdrawal of the furlough scheme that is currently set to end in October. The QE programme is likely to remain in place for some time, yet we have seen Bailey speculate that the rate of purchases will slow over time. Thus traders will be keen to understand greater detail on the ongoing rate of asset purchases.

We have also seen a more open-minded approach from Bailey with regards to negative interest rates, following on Carney's flat-out refusal to consider such an option. As such, commentary around such a possible shift could provide a downside move for the pound.

BoE forecasts provide major focus

With the quarterly inflation report comes a host of economic forecasts from the bank. With few changes expected on the monetary policy front, there will be significant interest in the growth and inflation outlook as a guide of where we go from here. Bank forecasts are usually far from the mark at the best of times. However, while the ultimate accuracy of the forecasts are questionable, markets will be keen to see whether we are looking at a ‘V’ or tick shaped recovery.

Where now for the pound?

The pound has started turning lower this week, coming off the back of a sharp surge last week. That recent rise took the pair into a third touch of a descending trendline, set within a wider bearish trend. That points towards a potential trend reversal here for GBP/USD, with a rise through trendline resistance the first break required to signal a potential shift in sentiment. However, we will ultimately require a rise through the $1.3515 level to bring an end to this downtrend.

On the daily chart, the current reversal looks likely to bring about a fresh break back below the 80 threshold on the stochastic. While July provided a fake-out signal, the past eight months have brought three successful bearish signals upon seeing the stochastic drop through the 80 threshold. With that in mind, a bearish phase could come into play from here, where a breakdown in the stochastic provides us with a potential sell signal.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.