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6 Aug 2013
Flash: What to expect from BoE tomorrow – UBS
FXstreet.com (New York) - The most important aspect of tomorrow’s BoE results - especially for trading opportunities - is investors’ expectation of 'conventional' forward guidance, notes Gareth Berry, a Research Analyst at UBS.
Key quotes
“Any design will be calendar and/or macro-variable based, and communicated in a way such that current BoE expectations for policy evolution should not deviate too far from where the market stands. Despite ongoing improvements in data, Governor Carney has already used his July policy statement to warn off markets from any early pricing of rate hikes, and the negative bias the market current holds on sterling suggests that investors do not wish to be caught out again.”
“Our FX Flow Report notes that GBP was the weakest performing currency within G10 last week, with the bulk of the short positions were accumulated in the run-up to the BoE decision on August 1st. Even though there was limited communication, reduction in shorts was very limited as the Inflation Report holds similar event risk. As things stand, our economists' base case is for a threshold-contingent framework (66% chance), with a 33% chance that the BoE also introduces a time-based program.”
Key quotes
“Any design will be calendar and/or macro-variable based, and communicated in a way such that current BoE expectations for policy evolution should not deviate too far from where the market stands. Despite ongoing improvements in data, Governor Carney has already used his July policy statement to warn off markets from any early pricing of rate hikes, and the negative bias the market current holds on sterling suggests that investors do not wish to be caught out again.”
“Our FX Flow Report notes that GBP was the weakest performing currency within G10 last week, with the bulk of the short positions were accumulated in the run-up to the BoE decision on August 1st. Even though there was limited communication, reduction in shorts was very limited as the Inflation Report holds similar event risk. As things stand, our economists' base case is for a threshold-contingent framework (66% chance), with a 33% chance that the BoE also introduces a time-based program.”