BOE report today 12.00 GMT 08.02.2018
Expecting a unanimous vote to keep the rates unchanged at 0.5%, Total QE to be kept at 435B £.
In line with the global state of the economies BOE will acknowledge better growth.
Their inflation report will be out at the same time . Interesting will be how they expect the trend to evolve after the past months’ overshooting . Just acknowledge or try to escape by calling it transitional and confirming they expected it to rise towards the end of the year and now equally expect it t top out?
Then Carney half an hour later will probably decide upon GBP’s fate for the rest of the session if the inflation report hasn’t done so yet.
How will he be bringing that one over knowing he’s a dove? He has some explaining to come up with.He needed to write two letters so far to explain the overshooting inflation, which was expected as he himself called for it to top the 3% end of the year, but now we’re 2018 and the outlook hasn’t changed much has it. Wage growth has picked up a bit but still underwhelms. Will he try to explain it’ll rise above inflation soon or will he blame the currency rise for the added notch or lower further expectations on growth due to Brexit uncertainties. He may try to use a little combo. It’s very fashionable for CB’s off late to try not to let their currencies rise. No later than yesterday’s Nowotny blamed the US administration to want to keep the USD intentionally low and di da good job sending EURO lower. Draghi said the currency fluctuations were not helping them to achieve their goals which originally stemmed to rise as well . SO why not Carney he?
If asked whether May will see the next interest rate hike: The market is about 50/50 about that meeting to hike . Risk is if they don’t, they will fall behind the curve.
I reckon he will hide behind the Brexit negotiations coming up in March to hold the ball off.
So my scenario is we may be in for a meeting where the most active part will be to avoid to say anything that could be damageable. Some call it being a coward, in CB terms it’s prudent.I let you judge .
The currency then ? Well we’ve seen a rangy EURGBP as per past months but finding tops a bit more difficult to overcome . That’ll be down to Brexit again in the next few months.
Cable then :we’re on some decent supports here in the 1.3800/50 zone . We have a major trend line coming in right here at 1.3850 going back to Feb last year which has been holding the past 24hrs.The 61.8% Fib of the Jan rally comes in at 1.3796. If BOE and especially Carney succeed to be dovish enough and we break these , then we’re looking at 1.3740/50.
Topside in case of a relative silence and acknowledgement of continued higher inflationary pressures we have the big figures to monitor 1.39 and 1.40.
In current situation of the USD being in a better spot, Brexit overhanging and risk a bit worse off, I would expect the market to try and find a rally to sell into and fade a 1% spike (1.40) if any hints of a further rate hike would transpire after all. Being only a half believer of the latest USD strength myself, I may in turn try to catch a falling knife if we get an undershoot of the latter supports low 1.37S . Combining both ideas , a fader in both cases may be the best option but the reports and press conferences have yet to hit the market , I will trade it as the price action unfolds.
As we’ve seen lately on any report , even the neutral ones have seen pretty violent algo and sheep driven swings so be ready , nimble and keep the positions and stops in accordance.
Safe travels and happy hunting
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