Forex Analysis For UK BOE Interest Rate Decision 08/05/10

BOE (Bank of England) will be rendering its interest rate decision today, and it should provide strong volatility in the market if BOE’s final decision is a surprise, here’s the forecast:

7:00am (NY Time) UK Offcial Bank Rate Forecast 0.50% Previous 0.50%
ACTION: GBP/USD BUY 0.75%

The Trade Plan
In the unlikely event BOE hikes rate to 0.75%, we’ll buy GBP/USD immediately on a spike trade. Because of the level of this surprise, I think we’ll see a strong trend change for GBP in the next few weeks, so we should BUY and keep a small portion for larger gains…

The Market
UK’s BOE, Bank of England’s Monetary Policy Committee (MPC) is once again scheduled to release their interest rate decision today and the expectations are to keep both their official bank rates at 0.50% and APF (Asset Purchasing Facility) of 200 Billion Pound unchanged. The important focus as usual will be the accompanying BOE Statement if they decide to release one, and it is customary for BOE to only release a rate statement if there is a change in either the Interest Rate or the APF.

Bloomberg’s survey of over 59 economists showed unanimous decision at unchanged verdict, therefore it is very likely this would be a no event. Furthermore, out of the 34 economists surveyed on the APF stimulus program, all 34 agreed that BOE should also keep it unchanged.

With the stellar 2nd quarter GDP release out of the UK 2 weeks ago and the ambitious spending cuts by the new administration, BOE Governor King may be leaning towards recovery more than controlling inflation. With UK’s inflation just above the target at 3.2%, the overall expectation is to see a gradual leveling off towards end of 2010. BOE may not need to hike rates until 2011.

Additional Thoughts
If BOE surprises the market, we should enter on a BUY immediately because we should see strong demand for GBP and this demand will be sustained for weeks… so it doesn’t really matter if you get slipped 50 pips or your broker widened your spread, it should work out in the end…

Pre-News Consideration
We are seeing a bit of pull back on the GBP/USD after a failed attempt to breach 1.60. With ECB rate decision and Trichet’s conference following close behind, we may not get much push in the market. I’d be looking for a possible ranged trading day today, therefore a BUY on dips for GBP should be justified.

Previously recorded live trading video on BOE Interest Rate Decision:

[flv:http://www.newsprofiteer.com/100809-boerate/100809-boerate.mp4 480 360]

Related posts:

1. BOE Interest Rate Decision – Forex News Trading Plan 11/04/10
2. Forex Trade Plan For BOE Interest Rate Decision 09/09/10
3. Forex Trade Plan For UK BOE Interest Rate Decision 12/09/10
4. Forex News Trading BOE Interest Rate Decision 01/13/11
5. Forex News Trading UK BOE Interest Rate Decision 02/10/11
6. Forex News Trading UK BOE Interest Rate Decision 04/07/11
7. Forex News Trading UK BOE Interest Rate Decision 03/10/11
8. Forex Trade Plan For Uk BOE Rate Decision 10/07/10
9. Forex News Trading UK BOE Interest Rate Decision 05/05/11
10. Forex News Trading UK BOE Interest Rate Decision 10/06/11

Tagged as: Afp, Asset Purchase Facility, Bank of England, BOE, Consensus Expectations, Economic Indicators, GDP, Gdp Release, Inflation, Interest rate, interest rate decision, monetary policy committee, MPC, MPC Rate Statement, Official Bank Rate, Prelim, Quantitative Easing, Sterling, Stimulus, uk gdp