Morning Report: 07.00 London
- This morning, the British pound is on the front foot despite the strong potential for an interest rate cut today. Markets are pricing in a 75% chance of a reduction from 0.5% to 0.25% today, but some analysts think the MPC could go further. No increase in QE are expected in this meeting, but there could be for the August meeting.
- Meanwhile, world markets continue to unwind their risk-off positions, with the US dollar nipping back and the USD/JPY nudging higher.
- The euro has been mixed since the turmoil of Brexit but is pushing higher this morning against the US dollar.
- Meanwhile, the Australian dollar is also making gains despite lower than expected unemployment figures this morning.
Coming up today:
- Coming up today we have the UK rate decision at 12.00, released alongside the monetary policy summary and asset purchase facility. Most are predicting a cut to 0.25%.
- Following this, we have US PPI at 13.30 alongside unemployment claims and core PPI.
Trade Idea:
- Today we get to learn how much a rate cut is already priced into the pound. A cut would not be a surprise and a larger cut closer to zero would only be a mild surprise to many.
- The pound may have some way to fall, but so might the euro as it too faces years of uncertainty. Despite a rate cut, it could well be a positive session today for the pound, especially against the euro.
- A good way to play this is a HIGHER trade predicting that the EUR/GBP will close below 0.83 in 14 days for a potential return of 163%.
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