07.05.202017:26 Forex Analysis & Reviews: EURUSD and GBPUSD. Don't blame others. China responded to the US. The pound is falling in anticipation of an increase in the Bank of England's asset purchase program this summer

The British pound temporarily rose on the decision of the Bank of England on interest rates, but after a more detailed study of the forecasts and the speech of the Governor of the Central Bank, the pound rushed down, breaking through fairly large levels of support.

The minutes of the Bank of England meeting show that the decision to keep the key rate at 0.1% was taken with a 9 to 0 vote. None of the Committee made a proposal to lower the interest rate to zero. And if such a decision was fully expected, then the situation is different from the asset purchase program.

Despite the fact that the Bank of England left the volume of the asset purchase program at 645 billion pounds, the decision to keep the volume of the quantitative easing program unchanged was made by a vote of 7 to 2. Haskell and Saunders voted for an increase in bond purchases by 100 billion pounds. In their opinion, the increase in stimulus measures will avoid a number of risks associated with the pandemic, but the majority of voters decided to leave the bond purchase program unchanged. No matter how much the British regulator resists, help to the economy will be necessary. Most likely, the Central Bank wants to learn more about the fundamental indicators for the 2nd quarter of this year, when the first outbreak of the pandemic began. This will make it possible to determine more correctly the amount of aid needed for a faster economic recovery. It is expected that by August of this year, the Bank of England will still announce an increase in the purchase program by 200 billion pounds, while in June the program may already be increased by 100 billion pounds. This was directly hinted at by Governor Andrew Bailey during a press conference.

As for the forecasts made by the bank's economists, a fairly rapid recovery is expected after a temporary drop in GDP. The reduction in UK GDP in the 2nd quarter of 2020 may vary within 25%, but these figures can be attributed to optimism.

As I noted above, the British pound resumed its fall against the US dollar after the speech of the Governor of the Bank of England, who said that he is ready to increase stimulus if necessary, but do not forget about government programs to support the economy, which should reduce the economic damage. Bailey also believes that in the event of a second wave of coronavirus outbreaks, the authorities will again be forced to take isolation measures, which will further damage the economy. The number of deaths from COVID-19 in the UK has risen to 30,076 and is the highest among European countries. Speaking about the possible increase in the asset repurchase program, Andrew Bailey did not talk about the projected volumes.

As for the technical picture of the GBPUSD pair, the movement continues along with the trend, and the bears have reached quite large support levels in the area of 1.2270. Only a burst of this range will open a direct path for the trading instrument to the lows of 1.2210 and 1.2160. In the scenario of an upward correction, the major resistance levels will be 1.2350 and 1.2400.

EURUSD

The European currency continues to trade yesterday's lows, ignoring weak reports on industrial production in the Eurozone, and the Chinese Foreign Ministry advised the US to calm down a little.

According to the Federal Bureau of Statistics Destatis, industrial production in Germany declined in March 2020 due to isolation measures and restrictions imposed by the government. Thus, production fell immediately by 9.2% compared to February, while economists expected it to fall by 8.8%. Compared to March last year, production fell by 11.6%. The most affected was manufacturing, where the figure in March fell by 11.6%. Let me remind you that this week also released an indicator indicating a 15.6% drop in orders in the German manufacturing sector in March, which indicates only the beginning of the problems that the country will face after the end of the spread of the coronavirus.

Things are not going well in France. According to a report by the statistics agency Insee, industrial production in France in March this year fell immediately by 16.2% compared to February, while economists expected a reduction of 14.5%. Compared to March 2019, production decreased by 7.3%. Most of all, production declined in construction, where the indicator fell immediately by 40.1%, while production in the manufacturing industry fell in March by 18.2%.

Meanwhile, the Chinese Foreign Ministry responded to the recent accusations of Donald Trump related to the outbreak of coronavirus in the world. Chinese Foreign Ministry spokesperson Hua Chunying said that the US authorities need to correct the mistakes made in the fight against COVID-19, and focus on containing the epidemic. Trying to blame others is not what the two states need right now. According to the diplomat, on the contrary, the US needs to fight the disease together with China, instead of being enemies.

As for the technical picture of the EURUSD pair, the breakout of large support of 1.0785 will only increase the pressure on risky assets, which will lead to a larger sale in the area of the lows of 1.0750 and 1.0720. Growth will be limited by yesterday's resistance of 1.0830, a break in which will open highs in the area of 1.0885 for buyers of risky assets.