Preview: BOE Meeting

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There was quite some speculation that the BOE would suspend its regularly scheduled meeting due to the coronavirus.

Several other central banks have done so, and the BOE has already taken pre-emptive action by cutting rates and initiating a massive quantitative easing program.

With the reference rate at 0.1% and the BOE set against negative rates, there doesn’t seem much room for policy change.

This has led to a lack of firm expectations from the meeting, with many economists being inexperienced with addressing a worldwide pandemic.

The policy of the UK government in regards to fighting the outbreak has changed quite recently. Therefore, there’s been little time for analysts to recalibrate the context to give a potential outlook for what the central bank might do.

Last Minute

We should note that given the government restriction on movement and meetings, it’s quite possible that the BOE could cancel the meeting at any time. This wouldn’t be a surprise to the market and likely wouldn’t have much effect on the currency.

This is also an important meeting. And that maybe one of the reasons why the session isn’t being cancelled, because it’s the first to be presided over by Andrew Bailey, since he took over.

Traders and analysts will likely want to take note of his style and adjust to the new direction coming from the bank. Will the new Governor bring any new stimulus ideas to the table?

It’s All About Stimulus Now

Regulators and officials have been desperately trying to stop the slide in the markets. Not because they care about the stock market in particular. It’s because the significant drop in equities was a warning sign of a lack of liquidity in the markets.

UK companies have not been exempt from the situation. Most have been availing themselves of their credit facilities in order to have cash through the uncertain next few weeks.

The strain has been felt on UK banks. This, in turn, has put pressure on the BOE to turn on the spigot to provide funds.

Other Measures

In an apparent effort to calm the markets, the FCA requested UK companies to not print their annual reports for two weeks.

There have been a plethora of firms issuing trading updates. Most largely withdrew their guidance, reported suspension of dividends and warned their investors about the potential impact of the coronavirus containment measures.

This has further weighed on the FTSE, In turn, it’s dragged on the pound Investors are already skittish about the safety of the UK over Brexit and are looking for somewhere to store their value.

Even gold has been on the decline, but now with the massive central bank stimulus, it is finally on the mend.

Finding Calm

The star of the event is likely to be the Monetary Policy Statement, as traders look to parse some guidance out of what the BOE might do in the near future.

However, the main message that the bank might be looking to convey, and why they are insistent on keeping the meeting on schedule, is that business as usual prevails. Maybe that will help calm the markets.

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