On Thursday at 11:00 am GMT the Bank of England (BOE) will publish its monetary policy decisions for the month of June.
Think you’re ready to trade the event?
Not before you know these key points first!
What happened last month?
- Interest rates and asset purchases unchanged in May
- BOE: continuing asset purchases could be “slowed somewhat”
- Andy Haldane voted to reduce QE purchases
Governor Bailey and his team shared that they were confident enough to “somewhat” slow down their asset purchases, but also added that it was no big deal because they’re still sticking to their £875 billion target.
Monetary Policy Committee (MPC) member Andy Haldane also made headlines with his vote to reduce the bond purchasing programme from £150 billion to £100 billion but was later discounted becasue he’s saying “Cheerio!” to the gang after June’s meeting anyway.
The pound initially spiked higher on talks of slowing down asset purchases, but the BOE’s commitment to its easy policies eventually dragged it lower across the board.
What are markets expecting this week?
- No policy changes expected
- No new economic forecasts
- Watch out for more BOE members hinting or voting for tapering
Because the economy hasn’t changed much since the last meeting and the BOE crew isn’t publishing new economic forecasts, markets don’t see the MPC making policy changes this week.
That doesn’t mean we won’t see GBP volatility though!
Keep your eyes peeled for anyone who would join Haldane in voting for reductions in their asset purchasing programme, as well as hints that the BOE is closer to discussing tapering in the foreseeable future.
How might GBP react?
A quick look at MarketMilk’s GBP Performance Overview tells us that the pound has been performing poorly against the safe-havens and has spotty performance against the comdolls and the European currencies this month.
If BOE members move a few steps closer to tapering or tightening this week, then we could see GBP gain ground against the safe-haven currencies and extend its gains against its fellow high-yielding bets.
If the event turns out to be a non-mover, though, then you can take advantage of the existing intraweek trends and extend the pound’s upswing or downswing against its major counterparts.
Not feeling like trading the decision? That’s alright, you can also sit on the sidelines. Don’t forget to practice proper risk management if you’re trading this top-tier catalyst!