Heads-up GBP Interest rate anoucment

I am a completely amateur economist, however having been a trader for the better part of a decade I know more about economics than your average guy. This week I believe I can make a very strong case for a possible 0.5% rate cut by the BoE on Thursday as opposed to the expected 0.25% cut. I am not going to lay it out here because I am tired and its way too much typing. Maybe tomorrow I will throw together a paragraph or two on my reasoning for expecting a possible 0.5% cut. Anyway, a quarter percent cut should be priced in so I doubt it will have a major impact on GBP/JPY. If however we see a 0.5% cut it could have a huge impact on GBP and it could send any open trade completely in the negative (or maybe in the positive). For this reason I will not be entering any GBP/JPY trades a few hours before the release and if they do cut by 0.5% I will not trade for a few horus after.

I am always cautious around the GBP interest rate statement but it usually does not stop me from trading. I only hold back when I see the possibility of a surprise. This week we have the possibility of a surprise….. since I am an amateur economist you may wont to ignore this post but if it happens don’t say I didn’t warn you.

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12 thoughts on “Heads-up GBP Interest rate anoucment
  1. thanks,pls i want to know what is the best thing to do if they actually cut rates by 0.5….and pls what is the best time frame to use…thanks nick

  2. pipette »

    Can’t say for sure this time since it is both a good and bad thing, it is bad for interest rates but good for the credit crunch…….

    That’s just extra reason to stay out.

  3. Maybe the best trade would be going long the Euro/Pound cross if they do cut rates by 0.5%. And also if the FOMC minutes are bullish for the dollar, shorting the pound/dollar might not be a bad idea either. :)

  4. I can not understand, why I should not short GBP/JPY or GBP/USD and take advantage of a possible rate cut.

  5. Sambhunath Majumder »

    I am telling you what I am doing personally. I am not saying what you should do, if you want to take a trade go for it!

    My opinion is that a rate cut right now might not have the same effect rate cuts normally do. Inflation is too high at the moment and the BoE is in a tight spot. The BoE needs to control inflation, that is their main objective. The problem now is that the credit crunch threatens to drag down the entire economy. So a rate cut right now is bad for inflation but good for countering credit crunch. The idea I think the BoE has is that they will first counter the more pressing issue of the credit crunch and then they will tackle inflation. To me it is not exactly clear what effect a rate cut will have on the pound.

    As for taking a trade before hand, the .25% rate cut is expected so it is already priced in. For that reason I see no point in taking a trade beforehand.

  6. Stop apologising for being an “Amatuer Economist”. Here in Great Britain we’ve got a complete bunch of amatures pretending to run the country!!!!
    As for trying to predict what there going to do. It makes no diffrence.
    I ‘ll end up paying more in tax this year than I did last year. My morgage will continue to go up. The services I pay for (local goverment tax/concil tax) will deteriate further, yet cost me more. Need I go on, I could.
    Am I angry? You dont know how angry this bunch of “Amature Politicians” (B*stard parasites) makes me.
    Pete