How to Trade News Events – The Bank of England Rate Decision
How Platinum Analysts see the Fundamental picture on the BOE and UK
The BOE’s policymakers will meet again this week on Thursday, the 2nd November 2017 to decide the Official Bank Rate and they are set to raise the Central Bank’s Key Interest Rate. In the Monetary Policy Committee’s (MPC) meeting minutes in September, there were strong indications that the BOE intends to raise interest rates as inflation is still on the rise (last yearly reading was 3%) and the UK economy poses the worst post-Brexit predictions.
When talking Fundamentals, an interest rate hike from the BOE this week should in theory benefit the Pound. However, Traders and Investors are aware that any rate increase at this point in time will come among signs of a slowing UK economy.
If officials do move this week, they are most likely to do it as a one off. The Bank of England will probably enter into a slow pace of rate hikes. We cannot forget that the Central Bank finds itself in a very difficult position as it tries to control inflation and incentivise the economy during the Brexit transition. Brexit negotiations over the coming years could hold back investment and consumer spending way before the date of Brexit itself.
Key Technical levels GBP/USD:
- 1.3660 – Long-Term Selling level
- 1.3005 – Long-Term Buying Level
- 1.2855 – Long-Term Buying Level – Platinum’s Premium Fib level
- 1.2670 – Short-Term Buying Level
- 1.2560 – Long-Term Buying Level
Trades on the Platinum Chart and Platinum System:
Before the day of the Rate Release, we will be taking intraday trades using the levels identified on the Technical Chart and the Platinum Trading Algorithm to refine our entry points.
On the day of the event, we will be looking for 3rd and 4th zones for reversals after the result is released. Platinum Traders never try to guess any Fundamental release. We only trade after the result is out and we can position ourselves according to our Fundamental knowledge and Technical Chart. We always have a bias, but only trade with finesse.
If BOE raises the Official Rate, the Pound is set to initially rise. Ideally, we would buy on a spike into a Key Support. Any Platinum Member will be aware of that kind of move on the market. Banks and Institutions will force the market in the opposite direction first to then start buying.
If BOE does not raise rates, the Pound will dive and you can actually sell on the spot. The reason behind this is because the market is certain of a hike by 9-0-0 on the MPC votes.
If you miss the actual event to buy or sell, no big deal! You can also have the Platinum BPC trade on a Daily Close below or above a significant Support and Resistance. That can be done by using the Technical Chart provided.
Always have in mind that trading any News Event is riskier than any other kind of trading and you should apply perfect money-management techniques and never revenge trade in case you take a hit. Other opportunities will always come if you are patient, and wait for the best set-ups.
If you would like to know why this would be the case, get in touch with the Platinum Team today, and we will be happy to help and explain the trade.
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