LONDON -Picadilly Circus junction. Image source: ©S4svisuals © 123RF.com
The Governor of Bank of England, Andrew Bailey, delivered a speech for the Resolution Foundation earlier today, with the topic of discussion being 'Getting Over Covid'.
BOE's top man laid out his expectations for sustainable economic growth in a post-pandemic world but also advised against premature celebrations as the global vaccine rollout continues.
He began his speech by stating that:
"I am going to talk today about the future, the post Covid future as the economy recovers from this traumatic experience. If I had to summarise the diagnosis, it’s positive but with large doses of cautionary realism."
Bailey's 'cautionary realism' refers to the remaining risks to the tentative global recovery. Chiefly, the shifting investors' sentiment brought about by persisting uncertainty, as many markets continue to be unnerved by recent developments.
Other central banks have already adopted similar cautionary stances, and the BOC and ECB are expected to follow suit this week. This implies that the projections of global policymakers are more or less inlined.
Baliey warned against possible long-term structural ramifications to supply and demand, as the coronavirus fallout could cause lasting distortions to the underlying equilibrium.
"Covid has been both a demand and supply shock to the economy, and the recovery therefore has to be in both elements, unusually so for recoveries I think. Absent a dual recovery, dealing with the issues that arise will be more difficult. […] Second, there are reasons to believe that so-called longer-term scarring damage to the economy will be more limited than in some past recessions, but there will most likely be structural change which will influence the future of supply and demand."
His remarks did not prompt any sudden volatility outbursts on any currency pairs involving the sterling, though the pound continues to be pulled between diverging bullish and bearish pressures.
As can be seen on the hourly chart below, the cable is currently in the process of establishing a Falling Wedge pattern, which could bring about the creation of a minor bullish pullback in the near future.
A potential breakout above the 1.38500 resistance will elucidate such a development for the price action.
GBPUSD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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