It's the so called Super Thursday (again) today where we get the BOE's triple whammy of interest rate decision/Minutes and inflation report at 12.00 GMT
Eamonn has already covered most of the scenario very eloquently here with more here and I concur with his wise counsel that caution is very much advised, particularly for the newbies amongst you
Much of the volatility will depend on just how much of the actual outcome is factored in. We can safely assume that interest rates will not go up today, and highly unlikely to do so until the Fed hike theirs and even then not necessarily straight away
So the real unknowns to make an impact are the vote count and inflation forecast and of those I'd say the voting is more of a lottery than inflation which we know to be a bit of a dampener for now and the foreseeable future. Not just in the UK but globally.
Says the FT:
"The BoE's mandate is for inflation at 2%, and in August it forecast inflation would be marginally above at the two-year horizon (2.09% in Q4 2017) and further above at the three-year horizon (2.14% for Q3 2018).
The calculations for this are based on current market expectations, so if the medium-term inflation outlook were to creep higher, that would imply the MPC envisages tightening policy before the market. Alternatively, if there is no change then traders will feel vindicated in their view that rates will remain lower for longer"
Much as it might frustrate central bankers, they are, by and large, not stupid enough to believe they can control it all but we should still expect Carney & Co to offer an upbeat forecast where possible. For me it will once again be interesting to see just how much focus/importance they place on the uncertain global picture. Reality is much different from perception
Carney has most recently made less than hawkish comments about rate hikes where he talked about them being a " possibility not a certainty" but lets not pretend, however dovish we/I might be that they won't happen at some point. He has enough hawks/more hawkish MPC members keen to press the button even if that won't be reflected in today's vote
Then what? Will that increased yield over everything except USD make the pound that much of a must-have or has that too been largely factored in ? My view remains that rate hikes in the UK have a high chance of slowing the economic recovery and that in turn will be reflected in the data a short way down the road
So it's a question now of simply waiting for the facts starting at 12.00 GMT with Carney's presser at 12.45 GMT but I remain on the dovish side and will look to sell GBP strength, unless we get a real curve ball thrown in.
As always trade what you see and get. GBPUSD has decent offers/res into 1.5450-80 then of course we have the magic numbers of 1.5500-10 to get across, then 1.5530 if we are to make further progress north. I still expect fresh supply coming in above 1.5580 though while on the downside we have immediate demand/support at 1.5350, then 1.5280-1.5300 before more at 1.5250 and 1.5200
EURGBP has been on the back foot lately given the weaker euro sentiment. Demand at 0.7035-50 then 0.6985-0.7000. Offers/res into 0.7085 then 0.7100-10 and 0.7135-50
There's 5 hours to go until the start of the circus proceedings so we may expect to see a combination of inaction and position squaring until then.
Caution advised. There will be plenty of opportunity in the aftermath but, as always, keeping your discipline is key.