Tuesday, July 19, 2011

UK MPC Meeting Minutes Bank of England - 20 July 2011

MPC Meeting Minutes is scheduled to be released today and since it´s customary for BOE (Bank of England) not to release a statement along with its interest rate decision (2 weeks ago) if there were no changes to either rate decision or APF (Asset Purchasing Facility, UK´s quantitative easing program); today will be the first time for a glimpse into what took place during this meeting, here is the forecast:

4:30am NY Time UK MPC Minutes Forecast 2-0-7 Previous 2-0-7

ACTION: GBP/USD BUY (3 Vote For Hike) / SELL (2 Vote For QE)

The Trade Plan

We will be looking at the vote count today. If we get 3 votes for hiking 25 basis points, we should see some strengthening in the Sterling and a BUY GBP/USD trade should be justified. If we get 2 votes for quantitative easing, or to increase the current APF from 200 Billion Pound, GBP should weaken and a SELL GBP/USD trade should be justified.

Due to the nature of this release, you need to have a newswire or audio service in order to trade it. We should see a steady market reaction after the release and possible carry over to the NY Session.

I´ll be looking for an after news retracement trade.
The Market

Last MPC Minutes stated that members of BOE are concerned over recent economic recovery struggles and the “downside” risks to both inflation and growth. Moreover, the statement “the fiscal challenges in the euro-area periphery highlighted the potential for further adverse shocks to demand” is likely to remain true, while BOE’s bond buying program remains “very much on the table”.

With last CPI y/y figure decreased to 4.2% from an expectation of 4.5%, it is likely to give the dovish camps more reason to keep rates unchanged in the future… If today’s vote count changes from 2 hike votes to 1, then GBP will take a tumble.

Additional Thoughts

It is my opinion that GBP is in a worse situation than the EURO for the long-term. I believe the key to trading the Sterling is to sell on rallies.

Pre-news Consideration

There should be no pre-news trading, but if I were a betting man, I would SELL GBPUSD at close or break of 1.6200