Pound traders watch $1.30 into BoE, QIR
The Bank of England (BoE) policy decision and the Quarterly Inflation Report (QIR) are the major macro events of the day. The BoE is expected to maintain its monetary policy unchanged, to revise its inflation forecast higher due to the significant pound depreciation posterior to the Brexit, yet to remain cautious regarding growth due to looming Brexit risks.
Traders will be watching the 1.30 level, which has acted like a solid resistance so far. It could be a make or break day for Cable.
Most frequently asked question is: Will Cable appreciate past 1.30?
The pound appreciated by nearly 3.80% against the greenback since PM Theresa May announced on April 18 that the UK will hold an early general election in June. The GBP-bulls continue betting that the early election could curb the extremes views in the Parliament, such as UKIP, set aside a part of the hardest Brexiteers and allow the UK to negotiate a smoother Brexit.
On the flip side, the divergence between the Fed, seeking to raise rates and shrink balance sheet simultaneously, and the BoE, hoping to stay as accommodative as possible despite the rising inflationary pressures, is in favour of a relatively stronger US dollar. The key resistance is eyed at 1.3044, the major 38.2% retracement on post-Brexit sell-off. A break above this level should suggest a mid-term bullish reversal in GBPUSD.
It is of course possible for the pound to extend gains above this level, should traders are ready to start unwinding their negative view due to the Brexit.
What could be that extra push for the pound bulls?
Rising inflationary pressures have encouraged Kristen Forbes to vote in favour of an interest rate hike at the latest MPC meeting.
The headline inflation in Britain rose to 2.3% year-on-year in March, highest since September 2013. Yet, the core inflation, excluding food and energy, eased to 1.8% from 2% printed a month earlier. Provided the recent fall in energy prices, a temporary pause in the headline inflation could be reasonable, and refrain the remaining MPC members from joining the hawk’s club this week.
The MPC is expected to vote 9-1 in favour of stable BoE rates. A more hawkish vote count could revive the BoE-hawks and could be the extra push needed for a pound appreciation above $1.30, yet will certainly not change the overall dovish outlook. The market assesses less than 60% probability for a rate hike to happen before the end of 2018.
Large call options are seen at 1.2960 and 1.3000 at today’s expiry. Failure to break above the 1.3000/1.3050 area could trigger a downside correction and encourage Cable to end the week below the 1.29 mark.
Gains in FTSE remained capped at 7380p at today’s open. The strong pound and the $1.30 taboo abstain buyers from entering fresh positions before the QIR.
Click here to read the full article on LCG.com
The Bank of England (BoE) policy decision and the Quarterly Inflation Report (QIR) are the major macro events of the day. The BoE is expected to maintain its monetary policy unchanged, to revise its inflation forecast higher due to the significant pound depreciation posterior to the Brexit, yet to remain cautious regarding growth due to looming Brexit risks.
Traders will be watching the 1.30 level, which has acted like a solid resistance so far. It could be a make or break day for Cable.
Most frequently asked question is: Will Cable appreciate past 1.30?
The pound appreciated by nearly 3.80% against the greenback since PM Theresa May announced on April 18 that the UK will hold an early general election in June. The GBP-bulls continue betting that the early election could curb the extremes views in the Parliament, such as UKIP, set aside a part of the hardest Brexiteers and allow the UK to negotiate a smoother Brexit.
On the flip side, the divergence between the Fed, seeking to raise rates and shrink balance sheet simultaneously, and the BoE, hoping to stay as accommodative as possible despite the rising inflationary pressures, is in favour of a relatively stronger US dollar. The key resistance is eyed at 1.3044, the major 38.2% retracement on post-Brexit sell-off. A break above this level should suggest a mid-term bullish reversal in GBPUSD.
It is of course possible for the pound to extend gains above this level, should traders are ready to start unwinding their negative view due to the Brexit.
What could be that extra push for the pound bulls?
Rising inflationary pressures have encouraged Kristen Forbes to vote in favour of an interest rate hike at the latest MPC meeting.
The headline inflation in Britain rose to 2.3% year-on-year in March, highest since September 2013. Yet, the core inflation, excluding food and energy, eased to 1.8% from 2% printed a month earlier. Provided the recent fall in energy prices, a temporary pause in the headline inflation could be reasonable, and refrain the remaining MPC members from joining the hawk’s club this week.
The MPC is expected to vote 9-1 in favour of stable BoE rates. A more hawkish vote count could revive the BoE-hawks and could be the extra push needed for a pound appreciation above $1.30, yet will certainly not change the overall dovish outlook. The market assesses less than 60% probability for a rate hike to happen before the end of 2018.
Large call options are seen at 1.2960 and 1.3000 at today’s expiry. Failure to break above the 1.3000/1.3050 area could trigger a downside correction and encourage Cable to end the week below the 1.29 mark.
Gains in FTSE remained capped at 7380p at today’s open. The strong pound and the $1.30 taboo abstain buyers from entering fresh positions before the QIR.
Click here to read the full article on LCG.com