Bank of England’s super Thursday preview

It’s is a Thursday and it’s a super one, thanks to Bank of England’s (BOE), mega releases and events. Today Bank of England (BOE) will announce its regular monetary policy along with minutes. What makes today special is the quarterly inflation report, which will be followed by a press conference from Governor Carney, along with an expectation that the central bank would hike rates for the first time since the ‘Great Recession’ of 2008/09.

All the three releases, individually have enough firepower to generate volatility spike and release of all three might cast a storm over pound based pairs. All will though depend on wordings. The market would be paying extra attention at today’s meeting as the central bank remains open to rate hikes due to higher inflation thanks to a weaker pound.

At the last meeting, the central bank issued a rare guidance saying that rate. It said, “A majority of MPC members judge that, if the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then, with the further lessening in the trade-off that this would imply, some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target.”

Preview of the four –

• Monetary policy decision – The market is expecting an interest rate increase of 25 basis points. The market would also be focusing on the choice of wording to understand whether the hiking cycle would continue or is it just a one-off event.

• BOE minutes – The market would focus on the minutes to assess the future bias and division among policymakers.

• Quarterly inflation report – Possibilities are high that tone might less hawkish while forecasting inflation as energy prices are low and as the exchange rate has moved higher. Moreover, shop prices declined again according to the latest report from BRC.

• Mark Carney speech – Mr. Carney has so far remained neutral over policy rate changes. The reporters would try to extract his views on future hikes.

Downside surprise with no rate hike would have more momentum today as a rate hike is widely expected. The pound would erase any gains from a hike if other commentaries such as the statement, press conference turn out to be dovish.

The pound is currently trading at 1.326 against the USD. The key resistance lies around 1.349 and key support around 1.307