CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

How to trade the pound ahead of BOE interest rate decision

The Central Bank is on the Radar. What does BOE have to say?

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
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Going long on the pound was a successful trade so far this week as GBP/USD continues to hover around 1.53 levels. The currency pair experienced huge swings so far this year and traders are trying to find a wave to ride.

 

 

 

 

Since February, we have seen 10 big moves.

26 Feb – 18 Mar                 - 920 pips

13 Apr – 29 Apr                   +933 pips

04 May – 14 may                +726 pips

14 May – 01 June                -646 pips

01 June – 18 June              +760 pips

18 June – 08 July                -600 pips

25 Aug – 04 Sep                  -658 pips

04 Sep – 18 Sep                  +498 pips

18 Sep – 01 Oct                   -552 pips

 

The recent 200 pips rally since last Friday was supported by weak US employment figures, suggesting that FOMC rate hike will not come to light in 2015. Yesterday’s better than expected UK industrial and manufacturing production figures along with AB InBev’s bid for UK’s SAB Miller also provided a boost, but didn’t last long as SAB rejected again AB InBev’s offer.    

Traders shifting focus now towards the Bank of England meeting which is largely expected to keep monetary policy unchanged. Policy makers should be assessing the effects of the sharp drop in the services PMI ‘lowest in 2.5 years’, zero percent inflation levels, and IMF downgrading global growth.

On the bright side, the economy created more jobs with unemployment dropping to 5.5% in the three months to July from a 5.6% in June, and the sticky wages finally started growing. In July both total pay ‘including bonus’ and regular pay ‘excluding bonus’ increased by 2.9%, the quickest rate in six years.

The bottom line: No rake hike is expected to happen nor change in asset purchase program but traders are monitoring closely any possible change in MPC votes, which currently stand at 8-1 with only Ian McCafferty voting for an immediate rate rise. Will Martin Weale add his voice to McCafferty? Or will McCaffarty join the doves? This will probably be the biggest mover for the GBP. If votes changed to 7-2 than an immediate rally towards 1.55 is highly probable with further gains towards 1.5650 in the near term. If all members voted to keeping rates unchanged than expect the recent two day rally killed.

FOMC minutes also scheduled for release today, but given the fact the meeting happened before the release of terrible non-farm payrolls, traders will most likely not price in the details mentioned in the minutes.  

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.