To Taper or Not To Taper?

Today’s BOE meeting is attracting a lot of attention given the recent build up in BOE tightening expectations. With the UK’s vaccination effort delivering tangible success according to the latest data and with the current reopening progressing well, optimism is rising. With this, the market is today looking for confirmation from the BOE which is expected to announced tapering of monthly asset purchases. If such a move is announced, with a signal that the BOE intends to move further along the path to normalising policy, this should lift GBP firmly. However, if the BOE hold off today, or announces a taper but signals no intention to adjust policy further in the coming months, this could send GBP lower.

Where to trade the BOE

GBPJPY

Following the breakdown beneath the rising channel in GBPJPY, the pair failed to break below the last swing low in the uptrend, held up by support at the 149.55 level. The pair is now caught in a range between support at the 149.55 level and resistance at the 152.78 level. With this in mind, there are clear two-way risks into today’s BOE meeting. Given the better risk backdrop recently, there is room for GBP to advance against JPY should the BOE meeting take a hawkish tone today. A break above the 152.78 level should encourage fresh momentum towards the 156.39 level. On the other hand, if the BOE meeting today disappoints bulls, GBPJPY could quickly retreat lower. A break of the 149.55 level should open the way for a move back down to the 146.78 level next.