Green shoots are appearing in the U.K. economy with consumer spending and services picking up following a disastrous 20% contraction of GDP in April, according to the Bank of England.

In a widely expected move, the Bank of England's monetary policy committee, or MPC, voted in favor of increasing its Asset Purchase Facility, or APF, by £100 billion, taking the total size of the bank's quantitative easing program to buy U.K. government and nonfinancial investment-grade bonds to £745 billion.

Despite the prospect of extra money printing, sterling rallied toward $1.26 in the aftermath of the announcement, almost wiping out the 0.5% fall in the morning trading, as the bank expressed a degree of confidence in the recovery of the economy.

"Recent data outturns suggest that the fall in global GDP in 2020 Q2 will be less severe than expected at the time of the May Monetary Policy Report," said the Bank's minutes from the June 17 meeting. "There are signs of consumer spending and services output picking up, following the easing of Covid-related restrictions on economic activity."

While output data will potentially be an upside, there was less good news on the labor market front. While the unemployment rate was unchanged at 3.9% in the three months to April, other more timely indications such as payrolls data and job vacancies suggest that the labor market has weakened materially.

In a press conference, Governor Andrew Bailey said this was the major indicator that decided the easing in financial conditions.

"It was a balance of the news we've had on activity and the news we've had on the labour market. The news on the labor market is significant and we think on balance it is negative news and that reinforces the judgement that we reached," Bailey said.

The members of the MPC voted 8-1 in favor of the increase with the lone dissenter preferring to maintain the size of the facility.

In the weeks building up to the meeting expectations of a £100 billion expansion in the size of the APF were largely baked into investors' thinking. At the May 7 meeting of the MPC, two of the nine members voted in favor of a £100 billion increase in the APF, while Governor Andrew Bailey subsequently confirmed in a press conference that the bank expected to reach its £645 billion limit in early July. With GDP plunging 20.4% in April following a 6% decline in March and the government having to dip deeper into its pockets to support the economy, the need for the bank to lend further support to ease borrowing costs was considered a near certainty by investors.

The bank maintained interest rates at 0.1% having cut rates from 0.75% in two announcements, on March 11 and 19.

Together with the Federal Reserve, the Bank of England has been among the more skeptical major central banks of negative interest rates, declining to join the likes of the Bank of Japan and the European Central Bank in the experiment.