BK GBP/USD Big Trade – Stopped Out

Swing

BK GBP/USD Big Trade -- Stopped Out at 1.5265


***BK GBP/USD Big Trade Entry 1 TRIGGERD to Buy 1 Lot GBPUSD at 1.5478. Place Order to Buy 1 More Lot at 1.5335 Stop at 1.5265

GBP/USD Big Trade – The BoE Rate Hike Trade

The Trade:

GBP/USD

BK GBP/USD Big Trade Entry 1+2 TRIGGERD to Buy 1 Lot GBPUSD at 1.5478. Buy 1 More Lot at 1.5335 Stop at 1.5265 Average now 1.5406

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.

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Bank of England Officials Still Talking About Raising Rates

There are only two major central banks talking about raising interest rates right now. One is the Federal Reserve and the other is the Bank of England. Both central banks see the current decline in inflation as temporary and while “dis-inflation” is a bigger problem in the U.K. than in the U.S., U.K. officials are more worried about wage growth.

We are not looking for the Bank of England to raise rates immediately but rate hike expectations should adjust after the recent improvements in U.K. data and hawkish comments form U.K. policymakers.

On Tuesday, we heard from BoE Governor Carney and Fed Chair Yellen. In contrast to Yellen who is in no rush to raise interest rates, U.K. officials are growing more concerned about wage growth. Yesterday, we heard from Carney, Weale and Forbes, all of whom seem to see the need for tightening. Carney did not talk about monetary policy specifically but he is one of the more hawkish members of the central bank. Forbes on the other hand said wage growth is picking up and there is limited slack in the economy. She felt that rates will have to rise at some point and a gradual increase should support the economy. Weale agreed that recent data confirms that pay pressures are building and monetary policy should be based on expected not current inflation. As a result, he felt that rates could rise sooner than the markets expected. Clearly, the majority of U.K. policymakers are leaning towards higher rates and we think this will drive sterling even higher.

Chart – GBP/USD Bottom

GBP/USD is currently attempting to break above 1.55 and we firmly believe that it will not only do so but trade as hit a minimum of 1.56. However we should get an opportunity to buy the currency pair on a pullback to 1.5478. If it continues to fall, another good place to add to our position would be right above the 23.6% Fibonacci retracement of the 2007 to 2009 decline with a stop at 1.5265.

GBPUSD022515

GBP/USD
Place Order to Buy 1 Lot GBP/USD at 1.5478

Place Order to Buy 1 Additional Lot at 1.5335

Stop at 1.5265

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.

BK GBP/USD Big Trade – Not Triggered

Swing

GBP/USD Big Trade – The BoE Rate Hike Trade

The Trade:

GBP/USD

Place Order to Buy GBP/USD at 1.5280

This is a Stop Entry, which means we are buying a break higher.

Stop at 1.5030

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.


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Next Move for Sterling will be Decided by Bank of England Minutes

Unprecedented times call for unprecedented measures and we are living in a period where central banks around the world feel the need to drop interest rates to negative levels in order to deter investment and to stimulate their economies. In this environment yield and return is truly a premium. When it comes to the outlook for currencies there is nothing more important than the direction that interest rates are headed and if tomorrow’s BoE minutes show a central bank unfazed by the recent dip in inflation and slowdown in economic activity, the British pound could be headed much higher.

Although GBP/USD has been holding up well compared to other major currency pairs, the fact that it is trading near 1 year lows indicates that investors are bracing for the worst. Rate hike expectations have been pushed back from mid 2015 to 2016 in some cases. With manufacturing, service and construction sector activity slowing in an environment of falling prices, a later rate hike would be justified. Not all news was bad however as retail sales and average hourly earnings rose. The market is bracing for dovish minutes and if the BoE proves otherwise, it would be a big surprise for sterling. In other words, the surprise trade is to the upside and that’s where we want to be.

In December two Monetary Policy members voted to raise interest rates. If McCaffery and Weale continue to push for policy normalization and the minutes are hawkish, we could see a bottom in GBP/USD with a potential squeeze up to 1.55. In addition to the minutes, the latest employment numbers are also scheduled for release. According to the PMIs, labor market conditions continued to improve pointing to positive data.

Important Trading Tactics

It is important to note that we are BUYING GBP/USD above market at 1.5280. Do not buy if the currency pair is below this rate because we are buying strength not weakness.

Chart – GBP/USD Bottom?

Place Order to Buy GBP/USD at 1.5280

This is a Stop Entry, which means we are buying a break higher.

Stop at 1.5030

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.