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British Pound Braces for Bank of England Information Overload

British Pound Braces for Bank of England Information Overload

2015-08-06 08:10:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • BOE to Unleash Rate Decision, MPC Minutes, Inflation ReportSimultaneously
  • British Pound Post-BOE Bias May Favor Upside on Hawkish Turn in Guidance
  • See Economic News-Flow Directly on Your Charts with the DailyFX News App

The Bank of England is firmly in focus in European trading hours. Policymakers will debut their new policy reporting scheme, simultaneously delivering a rate decision along with minutes from the accompanying meeting of the MPC policy-setting committee as well as the Quarterly Inflation Report (QIR). To cap things off, Governor Mark Carney will hold a press conference.

Needless to say, the sheer volume of information on offer in and of itself is likely to make for British Pound volatility. Equally obviously, the directional bias prevailing after the dust has settled will be driven by whatever the day’s revelations will mean for the likely timing of the first post-crisis BOE interest rate hike.

Conflicting forces pulling on inflation expectations are likely to be at the heart of the MPC’s thinking. On one hand, accelerating wage growth is putting upward pressure on prices. On the other, renewed weakness in energy and other commodity prices along with a fourth-month Pound rally are working in the opposite direction.

While an outright rate hike seems overwhelmingly unlikely, a hawkish minority voting to err on the side of tightening is expected to emerge. In fact, a unanimous decision to keep rates on hold may be seen as a somewhat dovish outcome. Alternatively, a hawkish contingent of greater than two votes may be seen as putting a rate-hike majority close within reach and amount to a hawkish result.

The QIR inflation forecast may likewise prove pivotal. In May, the BOE envisioned getting back to 2 percent inflation within three years assuming the first rate hike by mid-2016. Changes to this time frame as well as the underlying assumption for the onset of normalization may emerge as top takeaways for the day.

Recent comments from BOE officials including Mr Carney suggest the MPC is leaning toward overlooking near-term disinflationary forces to focus on longer-term upward pressure. This narrowly puts surprise risk on the upside for the UK currency. With that said, it seems foolish to try to pre-judge which among the deluge of on-coming catalysts will emerge as formative, much less which way it will nudge markets.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

01:30

AUD

Employment Change (JUL)

38.5K

10.0K

7.0K

01:30

AUD

Unemployment Rate (JUL)

6.3%

6.1%

6.1%

01:30

AUD

Full Time Employment Change (JUL)

12.4K

-

24.9K

01:30

AUD

Part Time Employment Change (JUL)

26.1K

-

-17.9K

01:30

AUD

Participation Rate (JUL)

65.1%

64.8%

64.8%

02:00

JPY

Tokyo Avg Office Vacancies (JUL)

4.89

-

5.12

05:00

JPY

Leading Index CI (JUN P)

107.2

106.9

106.2

05:00

JPY

Coincident Index (JUN P)

112.0

110.2

109.0

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

05:45

CHF

SECO Consumer Confidence (JUL)

-19 (A)

-6

Low

06:00

EUR

German Factory Orders (MoM) (JUN)

2.0% (A)

-0.3%

Medium

06:00

EUR

German Factory Orders (YoY) (JUN)

7.2% (A)

4.5%

Medium

07:00

GBP

Halifax House Prices (MoM) (JUL)

-0.6% (A)

1.6%

Medium

07:00

GBP

Halifax House Price (3Mths/Year) (JUL)

7.9% (A)

9.6%

Medium

07:30

EUR

Markit Germany Construction PMI (JUL)

50.6 (A)

50.7

Medium

08:10

EUR

Markit Germany Retail PMI (JUL)

-

54.0

Medium

08:10

EUR

Markit Eurozone Retail PMI (JUL)

-

50.4

Medium

08:10

EUR

Markit France Retail PMI (JUL)

-

48.9

Low

08:10

EUR

Markit Italy Retail PMI (JUL)

-

46.7

Low

08:30

GBP

Industrial Production (MoM) (JUN)

0.1%

0.4%

Medium

08:30

GBP

Industrial Production (YoY) (JUN)

2.2%

2.1%

Medium

08:30

GBP

Manufacturing Production (MoM) (JUN)

0.1%

-0.6%

Medium

08:30

GBP

Manufacturing Production (YoY) (JUN)

0.4%

1.0%

Medium

11:00

GBP

BOE Asset Purchase Target (AUG)

375B

375B

High

11:00

GBP

Bank of England Bank Rate (AUG 6)

0.5%

0.5%

High

11:00

GBP

Bank of England Inflation Report

-

-

High

11:45

GBP

BOE’s Carney Holds Press Conference

-

-

High

14:00

GBP

NIESR GDP Estimate (JUL)

-

0.7%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0724

1.0810

1.0858

1.0896

1.0944

1.0982

1.1068

GBPUSD

1.5343

1.5468

1.5536

1.5593

1.5661

1.5718

1.5843

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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