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- European session review: GBP strengthens amid eased negative rate expectations
European session review: GBP strengthens amid eased negative rate expectations
GBP rose against its major rivals in the European session on Tuesday, as the latest comment by the Bank of England’s (BoE) governor Andrew Bailey eased markets' expectations of negative interest rates in the UK.
Speaking to business leaders at a virtual event in Scotland on Tuesday, Bailey said that the negative rates were a controversial subject as there were “lots of issues” with cutting interest rates into negative territory. According to BoE's governor, the negative rates would complicate the banks’ efforts to be profitable and force them to restrict lending. Bailey added, however, that the BoE's policymakers would continue studying negative rates. He also acknowledged that Britain’s economy was in a “very difficult period” due to the recent Covid-19 lockdown, but noted that the impact of the latest coronavirus restrictions appeared less severe than that in spring of 2020.
Bailey's remarks on negative rates dampened some expectations that negative interest rates could be deployed by Britain’s central bank in May. However, gloomy prospects of the UK's economy continued to be the reason for concerns.
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