Bank of England is in focus…
There has been quite a few interesting developments in the markets from yesterday
A while back the US administration announced that they are planning to place 10% tariffs on an additional $200bl worth of Chinese goods. Yesterday, US Pres Trump announced that they are now considering raising the 10% to 25% on the potential tariffs. For the most part, the market has been growing more and more resilient to the trade was rhetoric so there was some reaction but it was muted for the most part.
The AUD had a good beat on their Trade Balance. The market was expecting a trade balance of $900M and the release came it at $1.87M. The reaction would have been better for the AUD if it wasn’t for the news about the increase in tariffs which subdued the move in our opinion.
CAD / MXN
The CAD and MXN also had a good day as the positive news on the current NAFTA negotiations are coming in on a daily basis.
The Dollar index has risen off the lows from yesterday after a non-eventful Federal reserve monetary policy decision. The market is still expecting at least two more hikes this year and nothing in yesterday’s report signalled any change to those expectations.
The British Pound will be in Focus today. For those of you who are not aware the BOE will have their monetary policy decision today at 11:00 GMT. This is a highly anticipated meeting today and we expect a lot of volatility with today’s release.
The market is expecting the BOE to hike rates today with a probability of about 62%. The big question today is not really whether there will be a hike or not. The big question is whether the BOE will be positive of negative in their expectations of the British economy and whether there is more hikes to come.
Any expectations about Brexit will be closely watched by the market and should provide added volatility. There are 9 members on the MPC, and the market is expecting a vote split of 7 (for a hike) to 2 (against a hike). Any surprises in the vote split will also be enough to move the markets.
With so many things going on and so many variables to consider we urge traders to be cautious and not to take anything at face value. Remember, there is a press conference half and hour after the data release so be very careful with any trades taken prior to the conference.
Important Scheduled Economic events during today’s session to watch:
08:30 (GMT) | GBP Markit/CIPS Construction PMI – with the BOE rate decision coming out just a couple of hours after this we don’t expect a lot of moves on the pound from this, but you never know.
11:00 (GMT) | GBP BOE MPC Bank Rate Decision – we suggest staying glued to the screens for this one (big volatility expected)
11:30 (GMT) | GBP BOE Governor Carney Press Conference – we suggest staying glued to the screens for this one (big volatility expected)
Our pair selection for today:
We have chosen the GBPUSD and GBPNZD as potential pairs we will be watching closely today to look for trading opportunities.
GBPUSD – Daily
GBPNZD – Daily
Further comments on our pair selection:
The reason behind our pair selections for today is quite simple.
GBPUSD – with the overall strength of the USD we will look for a sell on the pair in the case of negative reaction on the rate hike or press conference. The only challenge is that the pair is at significant lows already, so we will be extra careful with this one.
GBPNZD – with the recent bearish sentiment of the NZD we think this pair has a lot of upside potential if the case of a positive reaction on the rate hike or press conference.
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Risk Disclaimer: Forex Trading carries a high level of risk. It is possible for traders to lose entire trading accounts if they do not know what they are doing. This post is not an enticement, signal or recommendation to buy or sell any financial instruments. All of the information in this post should only be considered as general market commentary and should never be used as trading or financial advice.
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