BoE leaves interest rate and QE program unchanged, Cable fades initial bounce, Outlook bearish

At its scheduled May monetary policy meeting, the Bank of England (BoE) Monetary Policy Committee (MPC) as was widely expected, left interest rates and Asset Purchase program unchanged at 0.10% and £645 billion, respectively. 

The surprise element came from the BOE policymakers Haskel and Saunders, who voted for expanding the bond-buying program. They opined that "There would be greater economic scarring without more stimulus at this stage."

The pound has reacted positively on hopes for further monetary and consequent fiscal stimulus. However, the major soon faded the bounce as dovish vote distribution was overshadowed the latest optimism led by the UK PM Boris Johnson's indication to partially re-open the economy from Monday.

The BoE Governor Bailey struck struck a cautious tone saying, “significant loss of economic output has become inevitable.” The central bank noted that GDP may decline by at least 14% in 2020 but said that after a “temporary” fall the pickup in the economy may be “relatively rapid”, adding that  downside risks remain. 

The bank projects CPI inflation to fall significantly below the MPC’s 2% target, given falling energy prices and the weakness of demand. It rises to around the 2% target further out.

GBP/USD initial spike found resistance at 110H EMA at 1.2419. The pair has erased gains and was trading at 1.2349 at around 09:25 GMT. Technical indicators support weakness in the pair. Cloud offers strong support at 1.23. Break below will open downside.