BOE Up Next

Today’s main data focus will be the Bank of England rate decision due at the top of the hour. Given the recent spike in inflation, there are clear hawkish risks headed into the meeting, which might result in a firmer GBP post-meeting. While no movement in rates is expected, there is a strong chance the BOE might announce tapering of asset purchases which would be a strong upward signal for GBP. The greater focus, however, is likely to be on the forward guidance offered at the meeting. Traders will be keen to see if the BOE shifts its view on inflation given the record jump last month. If so, GBP will likely trade much higher in the near term as traders bring forward their rate hike expectations. On the other hand, if the bank opts to focus on the lingering pandemic uncertainty as well as the current crisis in the energy sector and the ending of unemployment benefits, this might see GBP undermined near term.

Where to Trade the September BOE Meeting?

EURGBP

The current price action in EURGBP suggests the risk of a correction lower in the near term. Price is currently capped at the .8591 level, near the top of the bearish channel. With indicators broadly flat, there is room for a push lower if today’s meeting fuels a GBP spike. Alternatively, expect a test of the channel top if GBP sell off on any BOE disappointment.