The Bank of England Paused and the Markets Preparing for NFP

5 feb 2021

The main event of yesterday was the Bank of England meeting but it didn’t bring any special surprises. The rate was left unchanged, and the monetary policy parameters, too. But the pound finally strengthened rather sharply. It’s because the Central Bank head said that the Bank of England negative rates in the near future is not an option.

Also, there were relatively good data on retail sales in the Eurozone (they came out with better results than forecasted). In our opinion, strengthening of the pound is unjustified, today we recommend buying the EURGBP pair, that is, buying the euro against the British pound.

However, the pound can be sold against the US dollar, as well. Yesterday’s data on initial and continuing jobless claims benefits were better than it was predicted. Coupled with ADP employment data, it gives some hope for today’s NFP figures. After the disastrous data for December, the January figures are expected to be at least in the positive zone. The dollar may well react positively to this. Accordingly, the GBPUSD pair will be under pressure—possibly it’ll be a double pressure. The UK economy isn’t in the best shape, as the pandemic is only now beginning to fade, but the lockdown is still on with all the consequences for the economy.