Daily Briefing, May 2 – “Super Thursday”, Good Day to Trade Sterling Pairs
Arslan Butt • 2 min read
Good morning, traders. It’s gonna be another volatile day as the market braces to trade the Super Thursday. Typically, the market exhibits fragile trading volume and volatility ahead of the big day as investors try to save their shots ahead of the NFP. Yet, the Sterling pairs will be in focus on the release of Inflation report and BOE Monetary Policy decisions. The BOE’s monetary policy decision, official bank rate vote and inflation figures remain in highlights. Let’s discuss the potential outcome.
Super Thursday – Key Economic Events Today
Since today is Super Thursday, the Bank of England will publish the monetary policy statement, Monetary Policy Committee (MPC) meeting minutes, and the inflation report at 11:00 (GMT). Moreover, the Office for National Statistics is also due to release it’s manufacturing production.
In short, the economic calendar is full of highly essential fundamentals from the United Kingdom. So, all the Sterling pairs are little rockets which can fly north or south depending upon decisions. We will see!
BOE Monetary Policy Decision
The odds of a rate change are almost 0%. BOE is widely expected to keep the rate on hold at 0.75%. The Bank of England is still on course to raise interest rates, had it not been for the high level of uncertainty due to Brexit. Does the delay in the UK’s exit from April to October provide more certainty and raise the chances of a rate hike?
Lately, the UK economic figures have been very disappointing.
Inflation slipped to 1.9%, below Bank of England’s target of 2%. GDP grew by only 0.2% vs. 0.5% in March. But with that, there were some events which outperformed, such as Manufacturing PMI and Manufacturing Production. The Unemployment rate remains unchanged at 3.5%. So logically, the BOE should be keeping the rates on hold until the economic data are back on track.
So what’s there for us to trade? Well, it’s the MPC Official Bank Rate Votes.
The BOE MPC meeting minutes include the interest rate vote for all MPC members during the most recent meeting. The division of votes presents an insight into which members are shifting their stance on interest rates and how likely the committee is to determine a rate change in the future. For the moment, the votings are 0-0-9, which means that all the members are expected to vote to hold the rate.
BOE Inflation Report is significant and beacons where the BOE sees inflation in the following years. Based on this, speculators draw forecasts on when BOE will hike the interest rate and also start pricing in the same sentiment.
Technical Setup in GBP/USD – Most Highlighted Pair Today
Technically, the Cable is massively overbought, and the daily RSI is holding in the overbought zone since the last week of April. Now, it severely needs to retrace back down though it’s hard for traders to sell Sterling until they have some kind of reliable fundamental support.
I think the BOE can be a reason for a bearish reversal today as no rate hikes are likely to put pressure on the Sterling. Technically, the pair is carrying a bearish trend. The cable has recently tested the bearish channel at $1.3080 and has formed a bearish engulfing candle on the 4-hour timeframe.
The 50 – periods moving average is holding near $1.2965 which means GBP/USD has enough room for selling.
In case of a hawkish policy decision, GBP/USD is likely to bounce off above $1.3000 to target double top resistance level of 1.3100. Whereas, a break below $1.300 can lead it towards $1.2975 and $1.2900.
So, good luck for today and trade with care!