British pound sterling: Currency in calm waters for now, but traders warned not to keep their stop-losses too tight ahead of guaranteed volatility

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Published on Thursday, 05 July 2012 09:06

Written by Will Peters

International Money Transfers at our sister site

"Investors are about to position themselves for this year’s most exiting interest-rate meeting of the ECB. Beware of too close S/L, as extensive, irrational intraday fluctuations are to be expected" - Jyske Markets.

The pound sterling (Currency:GBP) is, like the rest of the G10 currencies, going nowhere fast this morning. The reason is simple - we have big announcements due at the Bank of England and the European Central Bank. Then, tomorrow we have that all-important non-farm payroll report due out of the US.

For now though, the pound euro exchange rate is unchanged at 1.2441. The pound dollar exchange rate is 0.1 pct lower at 1.5574.  (Latest fx forecasts at our IMT site, access and updates available by entering through this Facebook entry way).

So what are the numbers to be expected when the BoE MPC gives their decision?


Consensus would suggest an increase in the Bank's asset purchase facility to the tune of 50bn GBP. Anything either side would move the sterling.

A lower number (more likely to be no increase in quantiative easing) would likely boost the sterling. Anything higher than 50bn would most likely push the currency lower.

Over at UBS analysts are predicting this will be the case:

"We expect the BoE to increase their asset purchase facility by £75bn (cons. £50bn) during their monthly MPC meeting. The need for greater stimulus to complement the BoE’s efforts to optimise credit allocation is seen as a more assertive strategy to bounce back from the current technical recession in the UK, though the BoE may also choose to highlight that with external conditions, especially those in the Eurozone remaining a strong headwind for the UK, it will take time for the results of the new measures to show."

Elsewhere we have the ECB interest rate meeting decision. For traders we have this advice from Jyske Markets:

"Investors are about to position themselves for this year’s most exiting interest-rate meeting of the ECB. Beware of too close S/L, as extensive, irrational intraday fluctuations are to be expected."

"We are in for an exciting ECB meeting, and for once there is much disagreement as to the outcome. JB does not expect any interest-rate cut, but a 1-year LTRO allotment.

"Others expect an interest-rate cut between 0.25% and 0.5%, and some ‘go all the way’ and expect a lower depo rate. Moreover, there were speculations whether once more the requirements relating to the provision of security will be relaxed. As always, it may be worthwhile to pay close attention to the subsequent press conference. We expect that Mario will give some signals for the coming period."