February 7, 2013
UK BOE Interest Rate
BOE (Bank of England) will be rendering its interest rate decision today, and it would provide strong volatility in the market if BOE´s final decision turns out to be a surprise, here´s the forecast:
7:00am (NY Time) UK BOE Interest Rate Forecast 0.50%
Previous 0.50%
APT (Asset Purchasing Target) Forecast 375B Previous
375B
DEVIATION: 0.25% interest rate / 25B Pound for APT
(BUY GBP @ +0.75% rate / SELL GBP @ +400B APT or
0.25% Rate)
Definition: (From Wikipedia) BOE Interest Rate, or the official bank rate (also called the Bank of England base rate[1] or BOEBR) is the interest rate that the Bank of England charges Banks for secured overnight lending. It is the British Government’s key interest rate for enacting monetary policy. It is more analogous to the US discount rate than to the Federal funds rate. The security for the lending can be any of a list of eligible securities (commonly Gilts) and are transacted as overnight repurchase agreements. When an announcement of the change in interest rates is made this is the rate the Bank of England is changing. Changes are recommended by the Monetary Policy Committee and enacted by the Governor.
The Trade PlanIn the extremely unlikely event BOE hikes rate to 0.75%, we´ll buy GBP 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… On the other hand, if we get a surprise increase to 400B or more in the APT or better known as quantitative easing, it would send a bearish signal to the market, and we should SELL GBP in the short-term; however, further stimulus is likely to help GBP in the long run, so if you missed the original SELL entry, I’d suggest to BUY GBP instead at support… There is also a possibility for a third scenario, BOE cutting rates to 0.25%, and if that’s the case, it should be a SELL on GBP.
Recommended Pairs : GBPUSD, GBPCAD.
GBP/USD - British Pound / US Dollar
Resistances : Weekly 1.577 ; Daily 1.5715 ; Hourly 1.5675
Supports : Weekly 1.5605 ; Daily 1.563 ; Hourly 1.5645
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