UK Quarterly Inflation Report today should be Governor King’s last quarterly report as BOC Carney is expected to take over BOE in June. Today’s Inflation Report will set the course for GBP as traders awaits confirmation on the recovery of UK economy. The Inflation Report will include projection for inflation (CPI and Core CPI) and economic growth for the next 2 years. The Governor, Melvyn King, will hold a press conference to discuss the report after the release.
5:30am (NY Time) UK Quarterly Inflation Report Forecast: N/A Previous N/A
Deviation: BUY GBP if hawkish / SELL GBP if dovish
The Trade Plan
We’ll be looking at the report but due to the current economic condition in UK, I’d recommend buy on dips unless we get weak tones from BOE with this report. Due to the nature of this release, you’ll need a newswire or audio service in order to trade it. If we see a strong market reaction after the release, the momentum could carry over to the NY session as inflation reports are considered high impact… If you do not have an audio service, I’d wait 3 ~ 5 minutes before trading as the market tries to digest the news… If we see strong whipsaw in the market, I’d probably just stay out.
At any rate, if you see a continous trend in one direction, go with the trend. The rule of thumb is that if Inflation Report is positive (upgrades CPI and GDP targets) then BUY GBP; on the other hand, if the Inflation Report is negative and focuses on the headwinds of UK economy, then SELL GBP would be the right choice… Of course, with recent economic indicators showing nothing but positive signs, if we get a strong projection today, GBP is likely to continue its bullish path.
I’d recommend to use the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: GBPUSD.
Outlook Score
Outlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.
Definition
The Bank’s quarterly Inflation Report was first published in 1993. The Report sets out the detailed economic analysis and inflation projections on which the Bank’s Monetary Policy Committee bases its interest rate decisions, and presents an assessment of the prospects for UK inflation. The Report starts with an overview of economic developments; this is followed by five sections:
- analysis of money and asset prices
- analysis of demand
- analysis of output and supply
- analysis of costs and prices
- assessment of the medium-term inflation prospects and risks