British Pound Short Trade Held into BOE Rate Decision

DailyFX

The British Pound seems unlikely to find meaningful support in a status-quo outcome to the BOE monetary policy announcement and we continue to hold GBPUSD short.

Talking Points

  • British Pound Short Trade Held into BOE Monetary Policy Announcement
  • Australian, NZ Dollars Outperform on Supportive Employment Data in Asia

The monetary policy announcement from the Bank of England headlines the economic calendar in European trading hours. Mervyn King and company are forecast to the size of the asset-purchase program unchanged at 375 billion. UK economic news-flow has cautiously improved relative to economists’ expectations since April’s sit-down of the rate-setting MPC committee. Furthermore the Bank extended its Funding for Lending (FLS) scheme late last month, limiting the scope for further action in the near term. A status-quo result seems firmly entrenched in investors’ baseline outlook however, meaning such an outcome unlikely to yield a dramatic response from the British Pound. With that in mind, we remain short GBPUSD.

The Australian and New Zealand Dollars outperformed in overnight trade. The Aussie added as much as 0.6 percent against its top counterparts after April’s Employment data topped expectations, weighing against calls for another RBA interest rate cut at the June monetary policy meeting. The report showed the economy added 50,100 jobs to trump calls for a meager 11,000 increase. The unemployment rate declined to 5.5 percent while the labor-force participation rate rose to 65.3 percent, marking an 11-month high. The Kiwi likewise benefitted from signs of labor-market resilience. Statistics New Zealand reported a 1.7 percent increase in employment in the first quarter, marking the largest gain in over 8 years.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Unemployment Rate (1Q)

6.2%

6.8%

6.8%

22:45

NZD

Employment Change (QoQ) (1Q)

1.7%

0.8%

-0.9%

22:45

NZD

Employment Change (YoY) (1Q)

0.3%

-0.7%

-1.4%

22:45

NZD

Participation Rate (QoQ) (1Q)

67.8%

67.8%

67.2%

23:50

JPY

Official Reserve Assets (APR)

$1258.0B

-

$1254.4B

0:00

NZD

QV House Prices (YoY) (APR)

7.1%

-

6.5%

1:30

CNY

Consumer Price Index (YoY) (APR)

2.4%

2.3%

2.1%

1:30

CNY

Producer Price Index (YoY) (APR)

-2.6%

-2.3%

-1.9%

1:30

AUD

Employment Change (APR)

50.1K

11.0K

-31.1K

1:30

AUD

Participation Rate (APR)

65.3%

65.1%

65.2%

1:30

AUD

Unemployment Rate (APR)

5.5%

5.6%

5.6%

1:30

AUD

Full Time Employment Change (APR)

34.5K

-

-4.1K

1:30

AUD

Part Time Employment Change (APR)

15.6K

-

-27.0K

2:00

JPY

Tokyo Avg Office Vacancies (APR)

8.54%

-

8.56%

5:00

JPY

Leading Index (MAR P)

97.6

97.7

97.7

5:00

JPY

Coincident Index (MAR P)

93.3

93.2

92.5

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

8:00

EUR

ECB Publishes Monthly Report

-

-

Low

8:30

GBP

Industrial Production (MoM) (MAR)

0.2%

1.0%

Medium

8:30

GBP

Industrial Production (YoY) (MAR)

-1.6%

-2.2%

Medium

8:30

GBP

Manufacturing Production (YoY) (MAR)

-2.0%

-1.4%

Medium

8:30

GBP

Manufacturing Production (MoM) (MAR)

0.3%

0.8%

Medium

11:00

GBP

Bank of England Interest Rate Decision (OBR)

0.50%

0.50%

High

11:00

GBP

BOE Asset Purchase Target (£)

375B

375B

High

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.3085

1.3207

GBPUSD

1.5473

1.5594

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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