Cable is back up to 1.2920 levels currently
Although the BOE surprised the market in the timing of their decision, the pound is taking the announcement in stride after the initial drop earlier. Cable hit a low of 1.2832 but has since bounced back to 1.2920 levels currently.
Notably, price is looking to keep above the 200-hour MA (blue line) at 1.2910 as buyers look to maintain a more neutral bias as the focus now shifts to the UK budget announcement.
As mentioned earlier, the timing of the BOE decision appears to be well coordinated to set up a strong fiscal and monetary message on the UK economy. In the medium-term, such a coordinated response is a good thing as it helps investor confidence.
So far today, even the near-term reaction is favourable for the pound:
The short-end of UK yields isn't extensively pricing in a drastic follow-up by the BOE and certainly not negative rates as of yet. Meanwhile, 10-year yields are even keeping slightly above the current policy rate of 0.25%.
As there is no significant repricing, this indicates that the market feels that the BOE has done enough alongside the likelihood of coordinated fiscal stimulus to bolster the UK economy amid the coronavirus outbreak - for now at least.
That said, be mindful of further reaction in other bond markets - Treasuries in particular - as that will also be a key factor in driving yields elsewhere.
There are a lot of moving parts in the market right now, but so far the ones affecting the pound are being looked at more kindly upon despite the BOE action.
Perhaps the coordinated response today is something that other countries could learn to try and take note of when this is all said and done. That said, global events could still have a big say as to how all this will play out so it is a bit too early to say that this is a good example.
