Trading The UK BOE Interest Rate Release, September 10, 2015
UK BOE Interest Rate Decision will be an interesting trade as BOE has decided to release vote counts and potentially a statement, which could drive GBP’s sentiment for the short-term.
7:00am (NY Time) UK BOE Interest Rate Forecast 0.50% Previous 0.50% 7:00am (NY Time) APT (Asset Purchasing Target) Forecast 375B Previous 375B DEVIATION: 0.25% interest rate / 25B Pound for APT (BUY GBP at +0.75% rate / SELL GBP at +400B APT or 0.25% Rate)
The Trade Plan In 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.
I’d recommend to use the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: GBP/USD.
Outlook Score Outlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.
Definition (From Wikipedia) BOE Interest Rate, or the official bank rate (also called the Bank of England base rate 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.