ZuluTrade Blog

BoE cuts interest rate by 50bps! What's the Market reaction?

Market View | Wednesday, March 11, 2020 11:57 AM GMT

Today Bank of England unanimously decided to proceed to an interest rate cut by 50bps (0.75% to 0.25%).  Additionally, they will follow Japan’s policy by introducing a financial aid package for the small and medium-sized companies due to COVID-19 impact. This move surprised markets positively, therefore, the EU market jumped to the upside at the opening (GER30 +1.99%, FRA40 +2.29% and UK100 +1.19%).  As concerns EU economic data, Spanish Retail Sales were improved by 1.7% while Dutch manufacturing production rises 0.3%.

Christine Lagarde, ECB President, advised EU leaders that they must take coordinated actions to fight the coronavirus rapid spread around Europe. She also added that ECB is willing to use all the policy tools during their meeting this week.

Technically speaking, most EU indices are moving in a range below their Monday’s gaps.

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GRE30 Hourly Chart

Unfortunately, Asian Indices had already closed before BoE’s announcement and most of them ended with heavy losses (NIKKEI -2.27%, KOSPI -2.78%, Shanghai Stock Exchange -0.94%).  Major Asian news is China’s total social financing drop to CNY 0.85 trillion in February while China’s Hubei province will let the people return back to their jobs. Reports say that S. Korea had 242 new virus cases while China informed that there are “imported” cases from Italy and the US.

On the other hand, US futures indicate a weak opening as virus cases surpass 1000 in the US (mainly in Washington, California and New York) while the US death toll reached 28.  Due to coronavirus, oddsmakers (Paddy Power) see Trump’s chances of wining to fall to 56% from 67% based on Yahoo Finance.  Additionally, Joe Biden won the Idaho Democratic presidential primary elections and looks to prevail in Washington state.

Reviewing currencies, EURUSD is trimming its early profits and is heading to yesterday’s lows. It may form an ABCD pattern. GBPUSD bounced back from the 78.6% Fibonacci level but there is an important intraday resistance at 1.3019. USDJPY closed its gap yesterday and it is currently consolidating (similar to indices) around 104-105 zone.

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EURUSD Hourly Chart

GBPUSD Hourly Chart

Today’s economic calendar includes the following news:

UnitedKingdom - BoE's Governor Carney speech
UnitedStates - Consumer Price Index ex Food & Energy (MoM) (Feb)
UnitedStates - Consumer Price Index ex Food & Energy (YoY) (Feb)
UnitedStates - Treasury Sec Mnuchin speech


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