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British Pound Seems Biased Upward on BOE Inflation Report

British Pound Seems Biased Upward on BOE Inflation Report

2016-05-12 08:24:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • British Pound seems biased upward on Bank of England Inflation Report
  • Aussie Dollar drops as consumer inflation outlook drops to 11-month low
  • Yen down, Nikkei higher after dovish comments from BOJ Gov. Kuroda

All eyes are on the Bank of England as traders eagerly look to comb through an updated Quarterly Inflation Report for clues about officials' views on the likely policy implications of June’s referendum on the UK’s continued membership in the European Union.

An ominous tone may be seen as likely to influence voters to opt forstaying within the EU, which may boost the British Pound. Rhetoric suggesting the central bank does not see the poll as a major factor in shaping near-term rate hike chances could produce similarly GBP-supportive conditions.

A significant “Brexit” risk premium is probably priced in at this point. This means the BOE would need to explicitly link a vote to leave the EU with a dovish policy turn to trigger outsized Sterling weakness. Such a scenario seems unlikely in that it risks significantly politicizing the Bank, hurting its credibility.

The Australian Dollar underperformed in overnight trade after a gauge of consumer inflation expectations hit an 11-month low, stoking RBA rate cut speculation. As it stands, traders price in a 22 percent probability of a 25 basis point cut at next month’s meeting.

The Yen declined while Japan’s Nikkei 225 stock index traded higher following dovish comments from Bank of Japan Governor Haruhiko Kuroda. The central bank chief stressed policymakers’ readiness to boost stimulus and warned that tightening may not occur within his tenure.

Are FXCM traders buying or selling the British Pound? Find out here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

NZD

BusinessNZ Manufacturing PMI (APR)

56.5

-

54.7

22:45

NZD

Food Prices (MoM) (APR)

0.3%

-

0.5%

23:01

GBP

RICS House Price Balance (APR)

41%

35%

42%

23:50

JPY

BOJ Summary of April 2016 Meeting

-

-

-

23:50

JPY

BoP Current Account Balance (MAR)

¥2980.4b

¥2965.6b

¥2434.9b

23:50

JPY

BoP Current Account Adjusted (MAR)

¥1893.6b

¥1910.0b

¥1686.6b

23:50

JPY

Trade Balance BoP Basis (MAR)

¥927.2b

¥906.7b

¥425.2b

23:50

JPY

Bank Lending Incl Trusts (YoY) (APR)

2.2%

-

2.0%

23:50

JPY

Bank Lending Ex-Trusts (YoY) (APR)

2.2%

1.9%

2.0%

1:00

AUD

Consumer Inflation Expectation (MAY)

3.2%

-

3.6%

1:00

JPY

BOJ's Kuroda at Parliament Committee

-

-

-

1:30

AUD

Credit Card Balances (MAR)

A$51.8b

-

A$51.9b

1:30

AUD

Credit Card Purchases (MAR)

A$25.5b

-

A$25.2b

2:00

JPY

Tokyo Avg Office Vacancies (APR)

4.23

-

4.34

4:30

JPY

Bankruptcies (YoY) (APR)

-7.08%

-

-13.15%

5:00

JPY

Eco Watchers Survey Current (APR)

43.5

44.0

45.4

5:00

JPY

Eco Watchers Survey Outlook (APR)

45.5

46.2

46.7

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Wholesale Price Index (MoM) (APR)

0.3% (A)

0.3%

Low

6:00

EUR

German Wholesale Price Index (YoY) (APR)

-2.7% (A)

-2.6%

Low

6:45

EUR

France CPI - EU Harmonized (MoM) (APR F)

0.1% (A)

0.1%

Low

6:45

EUR

France CPI - EU Harmonized (YoY) (APR F)

-0.1% (A)

-0.1%

Low

6:45

EUR

France CPI (MoM) (APR F)

0.1% (A)

0.1%

Low

6:45

EUR

France CPI (YoY) (APR F)

-0.2% (A)

-0.2%

Low

6:45

EUR

France CPI Ex-Tobacco Index (APR)

100.09 (A)

100.02

Low

9:00

EUR

Eurozone Industrial Production (MoM) (MAR)

0.0%

-0.8%

Medium

9:00

EUR

Eurozone Industrial Production (YoY) (MAR)

0.9%

0.8%

Medium

11:00

GBP

Bank of England Bank Rate

0.50%

0.50%

High

11:00

GBP

BOE Asset Purchase Target (MAY)

£375b

£375b

High

11:30

GBP

BOE's Carney Holds Press Conference

0.00%

-0.80%

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1258

1.1336

1.1381

1.1414

1.1459

1.1492

1.1570

GBP/USD

1.4258

1.4351

1.4399

1.4444

1.4492

1.4537

1.4630

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

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