Henry Liu
Former FPA Special Consultant
- Messages
- 473
BOE (Bank of England) will be rendering its interest rate decision today, and it should provide strong volatility in the market if BOE's final decision is a surprise, here's the forecast:
7:00am (NY Time) UK Official Bank Rate Forecast 0.50% Previous 0.50%
APF (Asset Purchasing Facility) Forecast 200B Previous 200B
ACTION: GBP/USD BUY 0.75% (Rate) SELL 225B (APF)
The Trade Plan
In the extremely unlikely event BOE hikes rate to 0.75%, we'll buy GBP/USD immediately on a spike trade. Because of the level of this surprise, I think we'll see a strong trend change for GBP in the next few weeks, so we should BUY and keep a small portion for larger gains...
On the other hand, if we get a surprise increase in the APF or better known as quantitative easing, it would send a bearish signal to the market, and we should SELL GBP/USD immediately.
I'll be trading this release using my Spike Trading Method, for more information:
Henry's Trading Methods.
The Market
UK’s BOE, Bank of England’s Monetary Policy Committee (MPC) is once again scheduled to release their interest rate decision today and the expectations are to keep both their official bank rates at 0.50% and APF (Asset Purchasing Facility) of 200 Billion Pound unchanged. The important focus as usual will be the accompanying BOE Statement if they decide to release one, and it is customary for BOE to only release a rate statement if there is a change in either the Interest Rate or the APF.
Bloomberg’s survey of over 56 economists showed unanimous decision at unchanged verdict, therefore it is very likely this would be a no event. Furthermore, out of the 31 economists surveyed on the APF stimulus program, all 31 agreed that BOE should also keep it unchanged. An economists from BNP Paribas suggested that BOE will probably not do anything until 2011, most likely in February of 2011 before increasing the APF. However, other economists (including ones that work with Deutsche Bank AG) predict that BOE is likely to hike interest rates BEFORE increasing stimulus. This mixed and uncertain picture reflects general market sentiment over UK's economy.
Additional Thoughts
If BOE surprises the market, we should enter on a BUY immediately because we should see strong demand for GBP and this demand will be sustained for weeks... so it doesn't really matter if you get slipped 50 pips or your broker widened your spread, it should work out in the end...
If BOE decides to keep everything unchanged, we should stay out of the market as there is no reason to be in.
Pre-News Consideration
Since the forecast is unanimous for unchanged on both interest rate and APF, there is no pre-news sentiment on this release.
Historical chart and data for UK BOE Interest Rate
Thanks,
7:00am (NY Time) UK Official Bank Rate Forecast 0.50% Previous 0.50%
APF (Asset Purchasing Facility) Forecast 200B Previous 200B
ACTION: GBP/USD BUY 0.75% (Rate) SELL 225B (APF)
The Trade Plan
In the extremely unlikely event BOE hikes rate to 0.75%, we'll buy GBP/USD immediately on a spike trade. Because of the level of this surprise, I think we'll see a strong trend change for GBP in the next few weeks, so we should BUY and keep a small portion for larger gains...
On the other hand, if we get a surprise increase in the APF or better known as quantitative easing, it would send a bearish signal to the market, and we should SELL GBP/USD immediately.
I'll be trading this release using my Spike Trading Method, for more information:
Henry's Trading Methods.
The Market
UK’s BOE, Bank of England’s Monetary Policy Committee (MPC) is once again scheduled to release their interest rate decision today and the expectations are to keep both their official bank rates at 0.50% and APF (Asset Purchasing Facility) of 200 Billion Pound unchanged. The important focus as usual will be the accompanying BOE Statement if they decide to release one, and it is customary for BOE to only release a rate statement if there is a change in either the Interest Rate or the APF.
Bloomberg’s survey of over 56 economists showed unanimous decision at unchanged verdict, therefore it is very likely this would be a no event. Furthermore, out of the 31 economists surveyed on the APF stimulus program, all 31 agreed that BOE should also keep it unchanged. An economists from BNP Paribas suggested that BOE will probably not do anything until 2011, most likely in February of 2011 before increasing the APF. However, other economists (including ones that work with Deutsche Bank AG) predict that BOE is likely to hike interest rates BEFORE increasing stimulus. This mixed and uncertain picture reflects general market sentiment over UK's economy.
Additional Thoughts
If BOE surprises the market, we should enter on a BUY immediately because we should see strong demand for GBP and this demand will be sustained for weeks... so it doesn't really matter if you get slipped 50 pips or your broker widened your spread, it should work out in the end...
If BOE decides to keep everything unchanged, we should stay out of the market as there is no reason to be in.
Pre-News Consideration
Since the forecast is unanimous for unchanged on both interest rate and APF, there is no pre-news sentiment on this release.
Historical chart and data for UK BOE Interest Rate
Thanks,
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