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GBPUSD to Threaten Key Resistance on Hawkish BoE Minutes

GBPUSD to Threaten Key Resistance on Hawkish BoE Minutes

David Song, Gregory Marks,

- Bank of England (BoE) Minutes to Show Unanimous Vote

- Was There Talk to Shift Forward-Guidance? Will They Promote Stronger Cable?

Trading the News: Bank of England Minutes

The British Pound may make a more meaningful run at the 1.6300 handle in the days ahead should the Bank of England (BoE) Minutes spur a more material shift in the policy.

What’s Expected:

Time of release: 11/20/2013 9:30 GMT, 4:30 EST

Primary Pair Impact: GBPUSD

Expected: --

Previous: --

DailyFX Forecast:--

Why Is This Event Important:

There’s growing speculation that BoE Governor Mark Carney will implement the exit strategy ahead of schedule in light of the stronger recovery, and the policy statement may highlight a growing discussion to lower the unemployment threshold as the central bank raises its outlook for growth.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Jobless Claims Change (OCT)

-30.0K

-41.7K

Mortgage Approvals (SEP)

66.0K

66.7K

Gross Domestic Product (QoQ) (3Q A)

0.8%

0.8%

The marked decline in unemployment along with the pickup in private sector lending may encourage the BoE to adopt a more hawkish tone for monetary policy, and the central bank may show a greater willingness to remove the highly accommodative policy stance earlier-than-expected as the region gets on a more sustainable path.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Retail Sales ex Auto (MoM) (OCT)

-0.1%

-0.6%

Consumer Price Index (YoY) (OCT)

2.5%

2.2%

Trade Balance (SEP)

-2.700B

-3.268B

However, the recent slowdown in price growth paired with slump in household spending may prompt the BoE to retain a cautious outlook for the region, and British Pound may continue to face range-bound prices over the near-term as market participants weigh the outlook for monetary policy.

Potential Price Targets For The Release

GBPUSD Daily

Forex_GBPUSD_to_Threaten_Key_Resistance_on_Hawkish_BoE_Minutes_body_Picture_2.png, GBPUSD to Threaten Key Resistance on Hawkish BoE Minutes

Chart - Created Using FXCM Marketscope 2.0

  • Retains Sideways Trend; Continues to Mark Closes Above 1.5900
  • Interim Resistance: 1.6250 Pivot to 1.6300 Pivot (2012 highs)
  • Interim Support: 1.5900 Pivot to 1.5910 (78.6% Fibonacci expansion)

How To Trade This Event Risk(Video)

Bullish GBP Trade: BoE Sounds More Hawkish; Shifts Policy Outlook

  • Need green, five-minute candle following the statement to favor a long British Pound trade
  • If reaction favors buying British Pound, long GBPUSD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; want at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish GBP Trade: BoE to Preserve Highly Accommodative Stance Throughout 2014

  • Need red, five-minute candle to consider a short GBPUSD trade
  • Carry out same strategy as the bullish British Pound trade, just in the opposite direction

Impact that the BoE Minutes report has had on GBP during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

OCT 2013

10/23/2013 8:30 GMT

--

--

-25

+38

October 2013 Bank of England Minutes

Forex_GBPUSD_to_Threaten_Key_Resistance_on_Hawkish_BoE_Minutes_body_ScreenShot424.png, GBPUSD to Threaten Key Resistance on Hawkish BoE Minutes

Minutes from the October 10th BoE rate announcement yielded little volatility following release, but the GBP/USD pair moved slightly lower before recovering towards the end of the daily close. Although better than expected data (and especially CPI numbers) have led some to speculate about a hawkish shift in forward guidance, mums the word continues to be the policy at Mr. Carney’s Bank of England. Positive incoming data was only mentioned in regards to evidence of a “robust” recovery and the BoE unanimously voted to maintain the asset purchase target of £375B with a record-low benchmark interest rate of 0.50% unchanged.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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