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Sterling fell sharply after UK rate setters are planning to deploy negative rates

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Policymakers warned if the economy fail to resist the fallout, negative rates are likely to hit in coming quarters.

Later Sterling revived after EU President stated about possibility of EU-UK deal.

The biggest attraction in Forex space encountered yesterday when Sterling weakened sharply after the Bank of England surprised investors by noting it is examining how negative interest rates might be implemented. The currency dropped 0.6 per cent against the dollar to trade as low as $1.2882 and it lost a similar amount against the euro to trade at €1.0928.

Interestingly meeting minutes revealed that BoE officials had been briefed on the central bank’s plans “to explore how a negative Bank Rate could be implemented effectively, should the outlook for inflation and output warrant it at some point”. The prospect of negative rates has typically met a cool response among policymakers who are mindful of the negative side-effects of the move in other parts of the world. But the latest statement offered a reminder that more quantitative easing, or bond buying, is not the only move left open to the BoE.

Later pound recovered its ground after President of the European Commission on Thursday said she was convinced a trade deal with the UK was still possible despite the “distraction” caused by Boris Johnson’s move to violate the Brexit withdrawal treaty. Going forward pound rupee as well as pound dollar pair will be highly volatile in coming days.

TREND : WEAK BULLISH

Time                                      :           18/09/2020

Pivot                                      :           1.2941

Technical View                     :             LONG ABOVE 1.2961

Target                                   :            1.2981, 1.3031, 1.3079, 1.3155

Technical View                     :             SHORT BELOW 1.2921

Target                                   :            1.2901, 1.2867, 1.2801, 1.2743

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