Forex Trade Plan & Video For UK MPC Meeting Minutes 08/18/10
MPC Meeting Minutes is scheduled to be released today and since it is customary for BOE (Bank of England) not to release a statement along with its interest rate decision (2 weeks ago) where there were no changes in either rate decision or APF (Asset Purchasing Facility, UK’s quantitative easing program), today will be the first time for a glimpse into what took place during this meeting, here is the forecast:
4:30am NY Time UK MPC Meeting Minutes Forecast 0-0-9 Previous 0-0-9
ACTION: GBP/USD BUY (2 Vote For Hike) / SELL (2 Vote For QE)
The Trade Plan
We will be looking at the vote count today. If we get 2 votes for hiking 25 basis points, we should see some strengthening in the Sterling and a BUY GBP/USD trade should be justified. If we get 2 votes for quantitative easing, or to increase the currency APF from 200 Billion Pound, GBP should weaken and a SELL GBP/USD trade should be justified.
Due to the nature of this release, you need to have a newswire or audio service in order to trade it. We should see a steady market reaction after the release and possible carry over to the NY Session.
Once again, MPC or Monetary Policy Committee, from Bank of England (BOE) will be releasing their meeting minutes on the Rate Decision meeting along with the actual vote count over the rate decision and the Asset Purchasing Facility program. If you recall, MPC once again left both intereste rate and APF unchanged.
We’ll have to pay more attention today and look for the vote count on both the rate decision and APF program. If there are any dissenters in either vote, we could see market react to it immediately and we’ll analyze the vote and possibly jump into a trade.
This is what is expected for this MPC Meeting Minutes: BOE Andrew Sentance is expected to be the lone dissenter again wanting a 0.25% rate hike. However, it is increasingly likely to see another BOE member joining him. If this is the case, market should take this as a sign that BOE is gradually moving towards more tightening.
On the other hand, last quarterly BOE Inflation Report opened the door for possible further monetary policy easing, or increase of the APF program from the current 200 Billion Pound level. As a matter of fact, during today’s inflation letter from BOE Governor King to Exchequer Osbourne, BOE is taking a neutral stance on both easing or tightening for the future (ease = cut rates or raise stimulus, tighten = hike rates)
We’ll wait for the release and then see how the market reacts afterwards. The focus will be on the actual vote count and if we do have dissenting votes, then market could move in a steady manner for the next few hours, giving us plenty of opportunity to cash in on the movement, therefore spike trading is really not necessary.
With the outlook for this meeting minutes remaining uncertain, a few analysts are calling for a 3 way split, which is for a 1 (hike) – 2 (increase APF) – 6 (unchanged). If we get this kind of split vote, 1-2-6 or 1-2-5 with one missing vote, market should react negatively towards the GBP.
I’m looking for a SELL on GBP/USD prior to the release on a spike up. I’d wait for an entry above 1.5650 level or even at the 1.5700 level before taking a SELL trade. MPC Minutes should reveal a stronger bias towards easing policy, especially after the recent CPI data and BOE Inflation report.
Here’s a pre-recorded video on my MPC Meeting Minutes Trade – In this video, I explained how to be flexible…