A preview of the Bank of England MPC meeting today 14 July 2016
I'm not one for using crystal balls or runes as my regular readers know but here's a few thoughts on what/why Carney & his MPC crew might do today.
My first thought is their total selfishness in picking the first day of the First Test v Pakistan at Lords when I should be taking my place as an MCC member in the hallowed Pavilion watching the cricket, but I do hope to get up there at some point.
Given my time constraints in flying solo this week I'll post this mainly as a few bullet points:
- my gut feeling is that Carney will hold fire on rates and keep his powder dry for the rocky road ahead. Can't rule out a 0.25% cut though. Little point in doing 0.1%.
- has already said that post-Brexit assessment would be made at July meeting and potential action in Aug
- he was keen to stress to the TSC this week that the bank were well stocked with cash and that is was the demand side that needed stimulating. That suggests a more fiscal rather than monetary injection imho. I can't see what good another 0.25% cut would do in real terms apart from a psychological one
- he may add QE or extend the post-Brexit emergency contingency of £350bln
- the appointment of Hammond as new UK fin min may have some bearing as the new govt will be looking to be pro-active whilst not being seen as hitting the panic button
- 87 meetings since last rate cut so why not wait another month? On the other hand I can also see the argument that says why delay til Aug
- expect plenty of caution/dovish tones in the Minutes but he will also highlight any positives. When he was testifying to the TSC he was keen to point out that in the longer term the UK would have positive times
- watch out for voting changes ( currently 9-0) whatever the outcome
Key question trading wise is what is factored in already. It seems the market has positioned for a cut of 0.25% therefore the down side should be limited if that is the outcome as traders stand poised to take profit.
A cut of 0.5% would see a concerted fall in GBP. Conversely if we get nothing from the MPC then we will rally but I still see sellers ready to jump back in bearing in mind the bigger picture
GBPUSD has a range of 1.30-1.3500 I think for the moment and currently at 1.3211 we're almost bang in the middle. I don't see it breaking these extremes unless something extraordinary occurs. Check the order board for interim levels in addition to your own chart analysis.
Please respect that I'm going to be posting solo on this and there's a lot to get out. My little typing fingers will do their very best to get it all to you asap with some analysis. I will provide a link to the Minutes so you can read them ( available on the BOE site anyhow ) but post the headlines.
As always trade what transpires. Go with the flow. Separate the wheat from the chaff depending on your time perspective. For the intra-day traders ours is not to reason why ours is just to sell and buy.
And above all, as always,
