Forex Investment and Currency Trading

1) NO change and no statement – Bean, Sentence and Besley are still hawkish on inflation even with the worsening data – the 6bp that are priced into today are immediately pushed to the June meeting for a fully priced cut making next weeks array of data all the more important. Sterling will rally 75pts and then be sold off as the momentum has clearly shifted to the downside and the BOE is only delaying the inevitable and pushing the economy to the brink. 1.9650 was the support level – sell in front of there – will cover on a close above that level.

2) 25bp cut – Blanchflower is able to convince 4 members to vote for the cut.  Expect similar commentary to April as growth conditions have deteriorated, credit conditions have tightened, and slowing growth should keep inflation in check. I worry slightly that they may find a way to be a little more hawkish in their commentary though. Sterling sells off 125 points, but doesn’t go into free fall.

3) 50bp cut – highly, highly unlikely (1% chance) – given the non consensus views and gradualist approach. Sell sterling – look for 1.9300