BoE to Keep Interest Rates, Asset Purchase Target Unchanged in February
Bank of England Interest Rate Decision (12:00 GMT)
Expectations: 0.50 Percent
Prior: 0.50 Percent
The Bank of England is widely expected to hold their key overnight lending rate and asset purchase target at 0.50 percent and 200 billion pounds respectively in the month of February. As of late, traders are pricing in a 16 percent chance that policy makers will hike rates twenty five basis points tomorrow, according to the Credit Suisse Overnight Index Swaps. As economic activity in the region is expected to come under pressure this year due to the government’s largest spending cuts since the Second World War, policy makers will likely refrain from raising borrowing costs. At the same time, the central bank is expected to keep its asset purchase program unchanged at 200 billion pounds as consumer prices remain stubbornly above the central bank’s target. Heading into the meeting, policy makers Martin Weale and Andrew Sentence will push for the base rate to rise to 0.75 percent, while Adam Posen votes to raise asset purchases.
All in all, currency traders may witness a lackluster performance in the British pound subsequent to the BoE rate decision if the central bank keeps borrowing costs and its asset purchase target unchanged as expected.
GBPUSD 1 Hour Chart
Charts Created Using FXCM’s Strategy Trader – Prepared by Michael Wright
GBPUSD: The pair remains bounded by its descending hourly channel that remained intact since February 3rd. As the technical indicators begin to paint a bullish picture, bears should caution entering into a short position ahead of the BoE rate decision. At the same time, it is worth noting that our speculative sentiment index stands at -1.63, providing the contrarian signal to remain long.
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Written by Michael Wright, Currency Analyst
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