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BoE to Keep Interest Rates, Asset Purchase Target Unchanged in February

BoE to Keep Interest Rates, Asset Purchase Target Unchanged in February

2011-02-09 19:10:00
Michael Wright, Currency Analyst
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Feb 10

Bank of England Interest Rate Decision (12:00 GMT)

Expectations: 0.50 Percent

Prior: 0.50 Percent

Fundamental Outlook

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.

Technical Outlook

GBPUSD 1 Hour Chart

BoE_to_Keep_Interst_Rates_Asset_Purchase_Target_Unchanged_in_February_body_gbpusd1.png, BoE to Keep Interest Rates, Asset Purchase Target Unchanged in February

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.

For More Technical Analysis Visit the DailyFX Technical Page

Written by Michael Wright, Currency Analyst

To Receive Future Articles by Email, please contact me at instructor@dailyfx.com

Michael Wright authors FX Headlines, Fundamentals vs. Technical’s, Intraday Trading, Weekly Spotlight, and Forex Trading Weekly Forecast

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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