04:28 GBP Services PMI (56.0 exp, 57.1 expected, 54.5 to 58.3 range)
This is the last of 3 PMI figures which are released this week. So far
the Manufacturing and Construction PMI numbers have been lower, there was
also some poor housing data out of the UK earlier this week. Service is
the largest sector of the economy so today's release will complete the
picture for these forward looking indicators. This indicator has stole
the limelight from the CAD employment recently as it has consistently
provided good moves on the pound, this has occurred even when the
deviations are only modest, such as in March, where a -1.1 lead to a
50 pip move over 10 minutes. However there have also have been some
rather large deviations, such as +4.5 in April leading to a 90 pip rally,
and +3.2 in February leading to a 65 pip rally, and a -3.1 in January
leading to a 80 pip drop. Even December 2010 -0.2 caused a 20 pip move,
and the +0.8 in November lead to a gradual 75 pip rally, but with only
a 15-20 pip initial spike and more gradual unfolding.
-If it is 57.1% or higher, GBP/USD should initially rally 30-45 pips
and may continue for another 20-40 pips.
-If it is 54.9% or lower, GBP/USD should initially drop 30-45 pips
and may continue for another 20-40 pips.
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0700 UK Interest Rate Decision - (unanimous to hold at 0.5%)43
Affliated Reports:
UK Asset Purchase Facility (unanimous to hold at 200B)29
All 43 of the analysts polled by Bloomberg predict that the BOE will
again hold off changing rates, and all 29 of the analyst polled think
the BOE will keep the Asset Purchase Target (QE) steady at £200B. PMI
figures this week were all lower than expect, but last week GDP was as
predicted. So at least GDP is not as bad as it was in Q4 2010, however
the forward indicators of PMI do not look great. The BOE is in a watch
and see mode, they are not willing to take a gamble in an attempt to get
ahead of the curve, still inflation is very very high, and there is
some criticism that they should do a hike to help tame it. If there is
no change it is unlikely the BOE will make a statement. So this is
unlikely to produce a trade, there will however be some volatility but
this can be random and thus risky.
If they hike, GBPUSD will go up over 100 pips
If the cut, GBPUSD will go down over 100 pips
if they raise APF by 25B, GBPUSD should drop 50-70 pips
if the cut APF by 25B, GBPUSD should go up 50-70 pips
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0745 ECB Interest Rate Decision - (unanimous to hold at 1.25%)
All 48 analysts polled by Bloomberg expect the ECB to hold for now.
This is likely based on the language of their last meeting. There
was no indication that the ECB was going to start a series of hikes,
and they want to get all the benefit of the 'expectation' of higher
rates, before they need to actually hike another 1/4 point to keep
those expectations going. They usually do not surprise the market,
and most analsysts expect the hikes based on the slight modifications
of statements made by Trichet.
If they hike, EURUSD will go up 60-90 pips
If they hold, EURUSD will go down over 60-90 pips
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