BOE Inflation Report – Forex News Trading

Jarratt Davis

Special Consultant to the FPA
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There is no opening trade call as we look ahead to the BOE Inflation Report & MPC Meeting Minutes. Prepare for this combined release by reading my analysis and watching my Forex news events overview here.

Due: 6th of August 12:00pm BST

Source:
Bank of England

Official Bank Rate Vote
Expected: 2-0-7
Previous: 0-0-9

Description:
The Monetary Policy Committee Meeting Minutes are published monthly, on the Wednesday of the second week after the meeting takes place. The minutes contain the interest rate and asset purchase vote for each of the nine MPC members during the most recent meeting. The breakdown of votes provides insight into which members are changing their stance and how close the committee is to enacting a change in monetary policy. This vote is reported in an X-X-X format; the first number is MPC members who want to raise rates, second to cut rates, third to keep on hold.

The Quarterly Inflation Report includes the BOE's projection for inflation and economic growth over the next 2 years. The BOE Governor also holds a press conference to discuss the report's contents after release. The QIR provides valuable insight into the bank's view of economic conditions and inflation; these are the key factors that will shape the future of monetary policy and influence their interest rate decisions.

Summary:
There is much anticipation surrounding this event as there are three separate data points being released concurrently; the Official Bank Rate decision, the Meeting Minutes, which contain the votes, and the Inflation Report. There is zero chance of a change in interest rates at this meeting, so there will likely be no accompanying MPC Rate Statement. Attention will focus on the change of votes in the minutes and the Bank's inflation and growth forecasts in the report.

Recent MPC minutes have shown that the decision to vote for rates remaining on hold was finely balanced for at least two MPC members. The consensus expectation is that two members voted for rates to be raised at the last BOE meeting. A change to 2-0-7 will be bullish for the pound and confirm the BOE are planning to raise rates in early 2016. The market will also focus on any relevant language in the minutes and how close the decision to change votes was for other members who are still opting for rates to remain on hold.

The inflation report has the capacity to move the market and may contain unexpected details regarding the BOE's forecasts. Carney will hold a press conference 45 minutes later to elaborate on the details of the report. Volatility can be expected to remain throughout the session.

Expected Market Reaction:
This combined release has the capacity to cause huge volatility and move the pound in either direction. The bias is to the upside in the context of recent hawkish language from BOE members, excellent wage growth and investment bank predictions of a rate hike in Q1 2016. If at least two members voted for a rate hike then we will see pound shoot higher immediately upon release. Direction after that will come from the details contained in the published minutes and inflation report. If there are no negative surprises then sterling should set off on a rally that will be sustained for several sessions.


P.S - If you want to learn more about how I trade, check out the link below

Forex Peace Army - Jarratt Davis

 
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