TheNews

Trading the News: Bank of England Interest Rate Decision

According to a Bloomberg News survey 30 of the 54 economists polled forecast the Bank of England (BoE) to reduce the benchmark interest rate to a fresh record-low, and GBP/USD stands at risk of facing additional headwinds over the near to medium-term should the central bank revert back to its easing cycle.

What’s Expected:

Why Is This Event Important:

With the U.K. positioned to leave the European Union (EU), the BoE may have little choice but to further support the economy in 2016 as Governor Mark Carney tries to avoid a recession. A material shift in the policy outlook is likely to drag on the sterling as interest-rate expectations falter.

How To Trade This Event Risk

Bearish GBP Trade: BoE Reverts Back to Easing Cycle

• Need red, five-minute candle following the rate decision to consider a short GBP/USD trade.
• If market reaction favors selling sterling, short GBP/USD with two separate position.
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bullish GBP Trade: Governor Carney Endorses Wait-and-See Approach

• Need green, five-minute candle to favor a long GBP/USD trade.
• Implement same setup as the bearish British Pound trade, just in reverse.

Potential Price Targets For The Release
GBPUSD H1

• The near-term rebound in GBP/USD may unravel amid the failed attempt to test the monthly opening range, with the British Pound at risk of facing near-term headwind should the BoE talk up expectations for additional monetary support.
• Key Resistance: 1.4880 (50% retracement) to 1.4930 (38.2% expansion)
• Key Support: 1.2460 (61.8% expansion) to 1.2500 pivot

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