On Tuesday, Bank of England’s Governor Dave Ramsden said that the positive news on the COVID-19 vaccine may help boost the economy and reduce the risks facing Britain’s economy.
Over the last two weeks, announcements that two vaccines were effective in the last trials have raised hopes for economies affected by the COVID-19 pandemic and hopes that the virus will be defeated over the coming year is increasing.
“Assuming the recent positive developments do translate into delivery of vaccinations, then they could … bolster resilience and mitigate some of the risks of long-term scarring,” Ramsden said in an online speech hosted by the University of Nottingham.
The news on the vaccines however will not result in an upgrade to the BoE’s economic forecasts said Ramsden since they already included an assumption that the effect of the pandemic will gradually lessen.
Acting as a bridge for the economy, the BoE increased its bond-buying stimulus plan by a further 150 billion pounds.
Ramsden also made no mention of possible interest rates below zero.
Ramsden repeated the view of Governor Andrew Bailey that the economy may not be that much damaged by the pandemic unlike the industrial makeup of Britain’s economy during the 1980’s and 1990’s
“That is because the tasks which will have to change are within sectors like services retailing, rather than between sectors,” Ramsden said.
However, the future onus on digital skills could hurt lower-earning workers.
Ramsden repeated the BoE’s guidance that there would be a high bar for any future tightening of monetary policy.
“We stand ready to take whatever additional action is necessary to achieve our remit of meeting the 2% inflation target in a way that helps to sustain growth and employment,” he said.
“But that process could take a long time, depending on how the healthcare response to COVID progresses,” he said.
“And some of the changes may persist for much longer if consumer tastes are changed: people may prefer to travel for work or tourism less often in the future, and may well continue to buy more online.”
In the daily charts of GBP/USD, the pair edged higher early Wednesday morning in Sydney session.
As what we can see in the chart, the pair continued to surge up from the support level at 1.31966. With Brexit hopes in the center of the news in UK, the sterling is picking up positive sentiment from investors. Meanwhile, in the United States, the dollar is depreciating due to stagnant economic activities brought by increasing number of Covid-19 cases.
A deal between EU and UK may further boost sterling’s outlook and may continue to surge and test the resistance level at 1.34872 or may breakout from the level and test fresh highs. However, a no-deal may hurt the sterling and the price may break down from the support level at 1.31966 and re-test the next support at 1.28685.
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