Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Please try again

Live Webinar Events


Economic Calendar Events


Notify me about

Live Webinar Events
Economic Calendar Events






More View More
British Pound May Bounce as Focus Turns from Brexit to BOE Policy

British Pound May Bounce as Focus Turns from Brexit to BOE Policy

Talking Points:

  • British Pound may rebound as spotlight turns from Brexit to BOE policy bets
  • US Dollar to face limited downside risk on soft Consumer Confidence report
  • Yen gains as Japanese stocks fall in Asian trade, boosting anti-risk currency

The outlook for Bank of England monetary policy is in focus as Governor Mark Carney, Deputy Governor Minouche Shafik as well as MPC members Gertjan Vlieghe and Martin Weale testify before Parliament’s Treasury Select Committee. The likely impact of the UK’s exit from the European Union is also likely to be discussed after London Mayor Boris Johnson’s pro-Brexit stance amplified fears of such an outcome.

BOE interest rate hike expectations have been deteriorating for some months now. The likelihood of an increase in 2016 has vanished from the priced-in forecast implied in OIS rates, with traders now seeing a 40 percent probability of a 25bps cut within 12 months.

This means that surprising investors on the dovish side of the spectrum ought to be relatively difficult. Alternatively, even very modestly upbeat rhetoric suggesting the Bank still sees the potential for stimulus withdrawal this year would clash sharply with the established status quo and could send the British Pound sharply higher.

On the issue on Brexit, Mr. Carney and company are likely to obfuscate rather than explicitly weigh on a politically charged topic. Officials’ comments will probably stress that the BOE will draw up multiple scenario plans to promote a return to on-target inflation regardless of UK voters’ ultimate decision on EU membership.

Later in the day, the spotlight turns to February’s US Consumer Confidence data. The report’s internals ought to prove most interesting, with the inflation outlook of particular interest after yesterday’s manufacturing PMI survey hinted that factory-gate prices fell at the fastest pace since June 2012.

A similarly disappointing tone this time around may reinforce the recent dovish shift in the priced-in Fed policy view. Such an outcome’s ability to materially hurt the US Dollar may be limited however considering traders no longer expect further tightening in 2016, making it comparatively difficult to produce a dovish surprise.

The Yen outperformed in overnight trade, rising amid liquidation of carry trades funded in terms of the perennially low-yielding currency as Japan’s benchmark Nikkei 225 stock index declined. A clear-cut catalyst for the move is not readily apparent, suggesting the risk-off mood may be corrective following the largest rally in a week in yesterday’s session.

Should you mirror what FXCM traders are buying and selling? Learn more here !

Asia Session

22:30AUDWeekly Consumer Confidence Index (Feb 21)114.3-113.6

European Session

07:00EURGerman Private Consumption (QoQ) (4Q)0.3%0.6%Low
07:00EURGerman Government Spending (QoQ) (4Q)1.2%1.3%Low
07:00EURGerman Capital Investment (QoQ) (4Q)0.1%-0.3%Low
07:00EURGerman Construction Investment (QoQ) (4Q)0.8%-0.3%Low
07:00EURGerman Domestic Demand (QoQ) (4Q)0.5%0.7%Low
07:00EURGerman Exports (QoQ) (4Q)-0.3%0.2%Low
07:00EURGerman Imports (QoQ) (4Q)0.3%1.1%Low
07:00EURGerman GDP s.a (QoQ) (4Q F)0.3%0.3%Medium
07:00EURGerman GDP w.d.a (YoY) (4Q F)1.3%1.3%Medium
07:00EURGerman GDP n.s.a (YoY) (4Q F)2.1%2.1%Medium
09:00EURGerman IFO Business Climate (FEB)106.8107.3Medium
09:00EURGerman IFO Current Assessment (FEB)112.0112.5Medium
09:00EURGerman IFO Expectations (FEB)101.6102.4Medium
10:00GBPBOE’s Carney, Shafik, Vlieghe, Weale Testify--High
11:15CHFSNB President Jordan Speaks in Frankfurt --Medium
13:30EURECB's Danièle Nouy Speaks in London --Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

To receive Ilya's analysis directly via email, please SIGN UP HERE

Contact and follow Ilya on Twitter: @IlyaSpivak

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