Yesterday, I gave y’all an overview of the central bank events lined up for this week. For today, let’s take a closer look at the upcoming release of the BOE’s monetary policy meeting minutes and figure out how to make pips from this event.
The previous release of the MPC minutes revealed that Governor Carney and his men saw no immediate need to hike rates, even as the jobless rate is moving close to their 7% target level. Despite that, the pound managed to soar against its counterparts when policymakers confirmed that the jobless rate would hit the target “materially earlier” than their initial estimate of at least three years.
Here’s how pound pairs reacted then:
Cable consolidated in the Asian session, made a small fakeout to the downside, then surged during the actual release of the BOE minutes. After a brief pullback, the rally carried on for the rest of the London session then consolidated below a major resistance level during the U.S. session.
As for Guppy, price action was already volatile hours before the BOE event since the Bank of Japan had its own monetary policy statement going on around that time. The pair made a strong jump when the BOE meeting minutes were released and also saw enough follow through in the succeeding hours.
Similar to Cable, EUR/GBP formed a neat Asian box pattern prior to the release then made a strong breakout during the event. Unlike GBP/USD which only saw a few hours of follow through, EUR/GBP continued to trade in the direction of the initial reaction until the end of the U.S. session.
If BOE policymakers sound relatively hawkish again, pound pairs might stage a repeat performance of their reaction to the previous release. Bear in mind that there’s a pretty good chance of seeing upbeat remarks, as Governor Carney recently announced an upgrade in the U.K. economy’s growth and inflation forecasts. Aside from that, he also hinted that the central bank is ready to move on to the next phase of forward guidance, which could include a time frame for monetary policy tightening.
Do you think these expectations have already been priced in though? Let us know by voting through the poll below!