– Bank of England (BoE) Widely Anticipated to Preserve Current Monetary Policy Stance.
– Will BoE Governor Mark Carney Continue to Warn of Higher Borrowing-Costs?
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Trading the News: Bank of England (BoE) Interest Rate Decision
The Bank of England (BoE) looks poised to retain its current policy ahead of the May election, but the uncertainty surrounding the fiscal outlook may continue to dampen the appeal of the British Pound as the central bank remains at risk of further delaying its normalization cycle.
What’s Expected:
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Why Is This Event Important:
Even though the BoE remains on course to raise the benchmark interest off of the record-low, there’s little evidence that the Monetary Policy Committee (MPC) is approaching the lift-off period, and Governor Mark Carny may endorse a more neutral tone going into mid-2015 should a shift in U.K. leadership raise the central bank’s scope to retain the highly accommodative policy stance for an extended period of time.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
Gross Domestic Product (YoY) (4Q F)
2.7%
3.0%
Retail Sales inc Auto (MoM) (FEB)
0.4%
0.7%
Jobless Claims Change (FEB)
-30.0K
-31.0K
Prospects for a stronger recovery along with the ongoing improvement in the labor market may encourage the BoE to normalize monetary policy sooner-rather-than-later, and the sterling may snap back against its major counterparts should the central bank implement a more hawkish twist to the forward-guidance for monetary policy.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Consumer Price Index Core (YoY) (FEB)
1.3%
1.2%
Average Weekly Earnings inc Earnings (3MoY) (JAN)
2.2%
1.8%
Construction Output s.a. (MoM) (JAN)
1.3%
-2.6%
Nevertheless, subdued wage growth paired with slowing price growth may keep the MPC on the sidelines throughout 2015, and a greater willingness to retain record-low borrowing costs for longer should further dampen the appeal of the sterling as it drags on interest rate expectations.
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How To Trade This Event Risk(Video)
Bullish GBP Trade: BoE Retains Current Policy & Continues to Talk of Higher Borrow-Costs
Need green, five-minute candle following the decision to consider a long GBP/USD trade.
If market reaction favors buying Cable, go long GBP/USD with two separate position.
Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
Move stop to entry on remaining position once initial target is hit, set reasonable limit.
Bearish GBP Trade: MPC Shows Greater Willingness to Further Delay the Normalize Cycle
Need red, five-minute candle to favor a short GBP/USD trade.
Implement same setup as the bullish sterling trade, just in opposite direction.
Potential Price Targets For The Release
Chart – Created Using FXCM Marketscope 2.0
Even though GBP/USD preserves the downward trending channel carried over from July, the lack of momentum to close below the 1.4700 handle may continue to produce range-bound prices ahead of the U.K. election.
Interim Resistance: 1.4980 (38.2% retracement) to 1.5015 (50% expansion)
Interim Support: 1.4700 pivot to 1.4710 (78.6% expansion)
Read More:
AUDJPY Snaps 9 Day Losing Streak- Long Scalps Favored Above 91.20
GBP/USD Capped Ahead of BoE- AUD Rebound at Risk on Slowing China CPI
Impact that the BoE rate decision has had on GBP during the last meeting
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
MAR 2015
03/05/2015 12:00 GMT
0.50%
0.50%
+3
+5
March 2015 Bank of England (BoE) Interest Rate Decision
The Bank of England (BOE) once again refrained from releasing a more-detailed policy statement as the central bank retained its current policy in March, with the benchmark interest rate holding at the record-low of 0.50%. Despite expectations for a stronger recovery, the BoE may continue to delay its normalization cycle as Governor Mark Carney warns of a temporary dip in price growth, but it seems as though the Monetary Policy Committee (MPC) remains on course to move away from its highly accommodative policy stance as the central bank head continues to prepare U.K. household and businesses for higher borrowing-costs. Nevertheless, the lack of fresh commentary spurred a limited reaction in the British Pound, with GBP/USD largely facing choppy price action throughout the day to end at 1.5248.
— Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx