How to Trade the BOE Rate Decision
|Few U.K. events can shake up the British pound as much as the MPC rate decision. It can lead to large, wild swings, and it can even affect pound price action over the course of a few days.
That being said, it would be crazy for you to trade the pound tomorrow without a clue as to what the Bank of England (BOE) may say or do. So if you're reading this now, I'd like to congratulate you - you're on the right track!
As it has done so for the past year, the BOE has kept rates unchanged at 0.50%. In fact, the central bank has kept their interest rate at that level for the past three years in hopes of stimulating lending, spending, and growth. As for their asset purchases, no changes are expected from the current 375 billion GBP level as well.
If forecasts turn out to be accurate and the MPC ends up keeping its rates and asset purchases unchanged, then we better prepare for possible trade setups! Luckily, the last two releases provide us with clues on how to trade GBP/USD, one of the most traded pairs at the release of the MPC's decision.
Based on past price reactions, unless the MPC drops bombs in its statement this month, we can expect a muted market reaction on Cable. Still, this doesn't mean that you shouldn't keep close tabs on pound pairs! You never know when a valid trade idea will show up!
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