The Bank of England rate rate decision is due today. There are only two possible scenarios under consideration –
BOE delivers - A rate cut as widely expected and hints more easing to come in the near future or
BOE under delivers – Bank stays pat today, but talks extremely dovish and readies market for a move in August
Often there is another scenario and that is ‘disappoints expectations’, however markets believe the possibility of BOE not cutting rates today and staying non-committal is next to zero.
For example, consider the guests on yesterday’s Finance show - (www.youtube.com/watch?v=ufDiNP_g...). Most of the city experts only talk about the first two scenarios, while little or almost no thought is given to a possibility of hawkish surprise.
Impact on GBP/USD
Despite retreat from 1.3315 (23.6% of 1.5019-1.2789) to 1.3134 on Wednesday, the subsequent rebound from the low of 1.3104 to 1.3210 levels seen in Asia coupled with a bullish 5-DMA and 10-DMA crossover suggests the pair could be heading back to 1.3315 levels today.
Further gains towards 38.2% of 1.3641 look possible over the next week on 25 bps rate cut as the move is already priced-in by the markets.
We could get a sudden spike to 1.3641 by tomorrow’s NY closing if the bank stays pat and non-committal.
On the other hand, hint at more easing in August (talk of QE) could open doors for a re-test of 1.2789 levels over the next week or so.
BOE delivers - A rate cut as widely expected and hints more easing to come in the near future or
BOE under delivers – Bank stays pat today, but talks extremely dovish and readies market for a move in August
Often there is another scenario and that is ‘disappoints expectations’, however markets believe the possibility of BOE not cutting rates today and staying non-committal is next to zero.
For example, consider the guests on yesterday’s Finance show - (www.youtube.com/watch?v=ufDiNP_g...). Most of the city experts only talk about the first two scenarios, while little or almost no thought is given to a possibility of hawkish surprise.
Impact on GBP/USD
Despite retreat from 1.3315 (23.6% of 1.5019-1.2789) to 1.3134 on Wednesday, the subsequent rebound from the low of 1.3104 to 1.3210 levels seen in Asia coupled with a bullish 5-DMA and 10-DMA crossover suggests the pair could be heading back to 1.3315 levels today.
Further gains towards 38.2% of 1.3641 look possible over the next week on 25 bps rate cut as the move is already priced-in by the markets.
We could get a sudden spike to 1.3641 by tomorrow’s NY closing if the bank stays pat and non-committal.
On the other hand, hint at more easing in August (talk of QE) could open doors for a re-test of 1.2789 levels over the next week or so.
