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Will Monetary Policy Speculation Move GBP Like it Has JPY, USD?

Will Monetary Policy Speculation Move GBP Like it Has JPY, USD?

2016-02-04 03:37:00
John Kicklighter, Chief Currency Strategist
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Talking Points:

• Top scheduled event risk for Thursday is the BoE rate decision - specifically the Quarterly Inflation Report

• Over the past few months, BoE rate speculation has collapsed and pummeled the Pound in turn

• There is an asymmetrical scenario for impact should the the event risk prove 'hawkish' versus 'dovish'

See the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold as well as our favorite 2016 trading opportunities in the DailyFX Trading Guides page.

Both the Yen and Dollar have dropped this past week with dovish headlines. Is the Pound staged to be the next major currency to be shoved by a change in monetary policy expectations? Market conditions are certainly ripe for capable fundamental catalysts. And, the upcoming BoE rate decision carries the weight necessary to light the fuse. The decision on changing the mixture of rates and asset purchases itself will likely prove a non-event. They have given little forewarning of an imminent change. Nor is their standard update worthy of recent volatility. The key to the upcoming event is the Quarterly Inflation report. This is similar to the Fed's quarterly forecasts in that it provides tangible forward guidance. And, given the impressive plunge in UK rate forecasts over the past few months, tangible central bank views can catalyze primed currency. We focus on the Pound and the BoE scenarios in today's Strategy Video.

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