By - Bank of England (BoE) to Keep Rate at 0.50%, Asset-Purchase Facility at GBP 375B.
- Monetary Policy Committee (MPC) Meeting Minutes Due Out on April 23.
Trading the News: Bank of England (BoE) Interest Rate Decision
The Bank of England (BoE) interest rate decision may generate fresh highs in the GBP/USD should we see a growing number of central bank officials show a greater willingness to normalize monetary policy sooner rather than later.
Why Is This Event Important:
Indeed, BoE Governor Mark Carney argued the first rate hike may come before the general election in May 2015 amid the stronger recovery in the U.K., and a further shift in the policy outlook should continue to heighten the bullish sentiment surrounding the British Pound as the central bank moves away from its easing cycle.
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Expectations: Bullish Argument/Scenario
Release | Expected | Actual |
Manufacturing Production (MoM) (FEB) | 0.3% | 1.0% |
Retail Sales ex Auto (MoM) (FEB) | 0.3% | 1.8% |
Consumer Price Index Core (YoY) (FEB) | 1.6% | 1.7% |
Sticky prices paired with the pickup in household & business activity may push the BoE to adopt a more hawkish tone for monetary policy, and the policy meeting may trigger a bullish reaction in the GBP/USD should the central bank lay out a more detailed exit strategy.
Risk: Bearish Argument/Scenario
Release | Expected | Actual |
Mortgage Approvals (FEB) | 75.3K | 70.3K |
Net Consumer Credit (FEB) | 0.7B | 0.6B |
BBA Loans for Home Purchases (FEB) | 50.0K | 47.6K |
However, the BoE may merely reiterate the policy statement from the March 6 meeting as the central bank continues to assess the margin of slack in the real economy, and the British Pound may face a near-term correction should the MPC meeting drag on interest rate expectations.
How To Trade This Event Risk(Video)
Bullish GBP Trade: BoE Sounds More Hawkish/Lays Out Detailed Exit Strategy
- Need green, five-minute candle following the meeting to consider a long British Pound trade
- If market reaction favors a bullish sterling trade, 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 Talks Down Interest Rate Expectations
- Need red, five-minute candle to favor a short GBP/USD trade
- Implement same setup as the bullish British Pound trade, just in reverse
Potential Price Targets For The Release
GBP/USD Daily Chart
Chart - Created Using FXCM Marketscope 2.0
- Bullish RSI Break Raises Risk for Higher High
- Interim Resistance: 1.6850-60 (78.6% expansion)
- Interim Support: 1.6400 (61.8% expansion) to 1.6430 (23.6% expansion)
Impact that the BoE Interest 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 2014 | 03/06/2014 12:00 GMT | 0.50% | 0.50% | -23 | +12 |
Bank of England (BoE) Interest Rate Decision March 2014
The Bank of England interest rate decision came and went once again in its usual fashion. As has become the norm, a quick spike in GBP was followed by an equally fast pullback. As this meeting does not proceed the ECB, we may see greater follow through, especially in the EURGBP cross.
--- Written by David Song, Currency Analyst and Gregory Marks
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
To be added to David's e-mail distribution list, please follow this link.
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