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British Pound May Rise on Bank of England Policy Announcement

British Pound May Rise on Bank of England Policy Announcement

2015-11-05 06:51:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • British Pound May Rise on Status-Quo Bank of England Policy Announcement
  • Japanese Yen Edges Higher as BOJ Minutes Dent Stimulus Expansion Hopes
  • See Economic Releases Directly on Your Charts with the DailyFX News App

A monetary policy announcement from the Bank of England is firmly in focus in European trading hours. Policymakers will unveil an updated quarterly Inflation Report as well as minutes from the meeting of the decision-making MPC committee along with the rate decision. Governor Mark Carney will also hold a press conference.

The broad trend in UK economic news-flow has steadily improved since mid-June. A steady uptrend in revisions to economists’ forecasts is also encouraging. This would probably set the stage for BOE tightening if inflation readings were not stubbornly stuck in a 4-year down trend. Last year’s oil plunge is only half of the story however: core inflation is also worryingly low.

Beyond energy prices, the Bank has linked sluggish price growth to the impact of Sterling strength. Indeed, the UK unit has trended higher against the currencies of key trade partners, weighing on import costs. On balance, this means the BOE will probably opt for a wait-and-see posture for now, marking time until it can assess the degree to which on-coming ECB easing and Fed tightening alter FX headwinds while the oil slump drops out of year-on-year CPI calculations.

Options pricing suggests investors are biased in favor for a stronger British Pound against most of its top counterparts. In this context, a result that keeps mid-2016 tightening bets intact against a backdrop of swelling global growth fears may give the currency a near-term boost, but follow-through might be limited. It may also hurt risk appetite however, weighing on sentiment-linked FX like the Australian and New Zealand Dollars.

Currency markets consolidated in narrow ranges in Asian trade as a quiet economic calendar allowed investors to digest recent volatility. The Japanese Yen edged slightly higher after minutes from October’s Bank of Japan policy meeting revealed a sanguine tone, hinting an expansion of the QQE stimulus program is unlikely in the near term.

Officials said the existing easing effort is exerting the intended effects while the trend in inflation continues to improve. Most BOJ members believe price growth will accelerate when the impact of last year’s crude oil plunge fades through re-basing.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Bank of Japan Oct. 6-7 Meeting Minutes

-

-

-

00:30

USD

Fed’s Fischer Speaks to National Economists Club

-

-

-

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

06:45

CHF

SECO Consumer Confidence (OCT)

-17.0

-19.0

Low

07:00

EUR

German Factory Orders (MoM) (SEP)

1.0%

-1.8%

Medium

07:00

EUR

German Factory Orders (YoY) (SEP)

1.9%

1.9%

Medium

08:00

GBP

Halifax House Prices (MoM) (OCT)

0.6%

-0.9%

Medium

08:00

GBP

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

9.5%

8.6%

Medium

08:15

CHF

CPI (MoM) (OCT)

0.0%

0.1%

Medium

08:15

CHF

CPI (YoY) (OCT)

-1.4%

-1.4%

Medium

08:15

CHF

CPI - EU Harmonized (MoM) (OCT)

-

0.4%

Low

08:15

CHF

CPI - EU Harmonized (YoY) (OCT)

-

-1.2%

Low

08:30

EUR

Markit Germany Construction PMI (OCT)

-

52.4

Medium

09:00

GBP

New Car Registrations (YoY) (OCT)

-

8.6%

Low

09:00

EUR

ECB Publishes Economic Bulletin

-

-

Medium

09:10

EUR

Markit Germany Retail PMI (OCT)

-

54.0

Medium

09:10

EUR

Markit Eurozone Retail PMI (OCT)

-

51.9

Medium

09:10

EUR

Markit France Retail PMI (OCT)

-

49.6

Low

09:10

EUR

Markit Italy Retail PMI (OCT)

-

51.7

Low

10:00

EUR

Eurozone Retail Sales (MoM) (SEP)

0.2%

0.0%

Medium

10:00

EUR

Eurozone Retail Sales (YoY) (SEP)

3.0%

2.3%

Medium

10:00

EUR

European Commission Economic Forecasts

-

-

Medium

10:45

EUR

ECB's Draghi Speaks in Milan

-

-

Medium

12:00

GBP

BOE Asset Purchase Target Nov

£375B

£375B

High

12:00

GBP

Bank of England Bank Rate (Nov 5)

0.5%

0.5%

High

12:00

GBP

Bank of England Inflation Report

-

-

High

12:45

GBP

BOE’s Carney Holds Press Conference

-

-

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.1017

1.1101

1.1154

1.1185

1.1238

1.1269

1.1353

GBPUSD

1.5264

1.5319

1.5344

1.5374

1.5399

1.5429

1.5484

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

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