BOE In Focus
The February Bank of England meeting due today is drawing a great deal of focus, with the market widely expecting the BOE to hike rates by a further .25% to 0.5%. With omicron risks having fizzled out, the labour market continuing to tighten and inflation soaring, there seems little case for the BOE refraining from action today.
Given the market’s view, the focus will therefore mostly be on the bank’s accompanying outlook and economic forecasts. The market has turned more hawkish in its expectations since the last meeting and will be looking for the BOE to upgrade its own language, to satisfy these expectations. Specifically, the focus will be on the BOE’s rate path projections. The market is currently ahead of the BOE, looking for rates to hit 1.25% by year end and so will be looking for an upward revision from the BOE today.
If the BOE delivers on meeting these hawkish expectations, then GBP is likely to see a strong bid on the back of the meeting. However, if the BOE fails to satisfy GBP hawks, we might see some near-term unwinding of GBP.
Where to Trade the February BOE Meeting?
GBPUSD
The pair looks to be carving out a large, sloping, inverse head and shoulder pattern with the right shoulder forming off the 1.3349 level. With US Fed member commentary having softened a little this week, there is room for GBPUSD to advance if the BOE turns more aggressively hawkish. Look for a break of the channel top and 1.3676 level, targeting 1.38 initially and 1.40 thereafter.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.