We are expecting key news events today and i will be paying very close attention to the finer details. We have 3 key news events today, of which i would classify 2 of them that can be traded and 1 of which is of keynote importance
News Events – 4th Feb
1) GBP – Official Bank Rate – 0700 hrs NY – 2000 hrs SGT
2) EUR – Minimum Bid Rate – 0745 hrs NY – 2045 hrs SGT
3) CAD – Ivey PMI – 1000 hrs NY – 2300 hrs SGT
Let us cover each of these news events in clearer detail.
1) GBP – Official Bank Rate – 0700 hrs NY – 2000 hrs SGT – This is my news for pick of the day and though i don’t expect drastic interest rate hikes or revisions and expect interest rates to be left at 0.5%, there is a stronger underlying message that this decision will bring.
As you would already know, BOE(Bank of England) has been increasing money supply in the market since last year heavily via its QE(Quantitative Easing) program. This program has already expired last week, at the start of Feb. Next in line is the so called “Asset Purchasing Facility” (APF) which is bound to expire end of this month. Therefore the fiscal stimulus given via these programs is considerable and pulling them out can mean a surge in demand for the GBP and will cause it to strengthen dramatically.
On the other side, one has to consider the risks of such a premature program termination. As the economy is ailing and much growth(both on the US and UK front) that UK has experienced so far is doubtful without government intervention, there has been only a 0.1% growth in the last Q4 quarter and inflation has hit 2% target that the MPC had set. This is not even growth in my opinion but just a minor swelling. Regardless, most optimists will argue that it is no longer negative at least.
Therefore, if BOE decides to pause or pull the plug on such stimulus programs, expect strong GBP demand in expectation of renewed demand. However, if they are pretty clever with their words or being wishy washy about extending the program, expect the GBP slide to continue although it could not really be a market mover but just a reinforcement of the current trend.
2) EUR – Minimum Bid Rate – 0745 hrs NY – 2045 hrs SGT – The European Central Bank will possibly have its interest rates unchanged at 1.00%. Most experts and analysts agree that the problems of the EuroZone are too much and of a severe imbalance to command any rate hikes. In my opinion, this could possibly last till end this year or even next year, unless we see a dramatic turnaround in the financial health audits of these countries and the whole EuroZone as a whole, esp with the PIGS(Portugal, Ireland, Greece, Spain)
As Euro is in its seasonal low since November and with USD strength that both Eur/Usd and Gbp/Usd have been taking a downslide, i will like to see news that continues the market in the same direction, if i were to trade the post news sentiments today. If there was a strength indicating news, either for the Eur or the Gbp or both, i might not take a trade to buy either pair against the looming uncertainty of upcoming NFP news release tomorrow.
USD strength/uncertainty tomorrow may complete override sentiments of these releases therefore be aware if you are taking a counter trend trade.
As always, stay safe and manage your risks by taking calculated chances.
