GBPUSD volatility preview in advance of BoE interest rate decision

Market Leader informed

March 10th

09:30 GBP - Manufacturing Production

12:00 GBP - Asset Purchase Facility

12:00 GBP - Official Bank Rate

Tentative GBP - MPC Rate Statement

13:30 USD - Trade Balance

13:30 USD - Unemployment Claims

March 11th

09:30 GBP - PPI Input

13:30 USD - Core Retail Sales

13:30 USD - Retail Sales

14:55 USD - Prelim UoM Consumer Sentiment

20:45 GBP - BOE Gov King Speaks

The news background is not so rich in significant news releases. This week’s key event is Official Bank Rate (the decision is made by the Bank of England). The BoE is most likely to leave the key interest rate as it is (at the record-low level of 0.5%). The politicians postpone the decision to do something about the growing inflation rate as the major concern is the pace of the UK economic recovery.

The results of the recent inquiry held by Bloomberg news agency (61 economists were interviewed) show that the respondents share the same opinion that the 9 members (including the BoE Governor Mervin King) of the MPC are going to leave the official bank rate as it is while maintaining the bond purchase program to the sum of 200B pounds ($325B). The release is scheduled for March 10^th, a week after Jean-Claude Trichet said the ECB would probably increase the interest rate in April.

Last month 3 MPC members voted for increasing the interest rate together with Andrew Sentence, urging the BoE to increase the official bank rate by 50 base points to curb the inflation, which increased the limit by 100%. However, the economic growth slowed down by 0.6% in Q4 2010. Charles Bean, Deputy Governor of the BoE, says that the recovery is still problematic and weak.

The Manufacturing Production report is also scheduled for March 10^th. According to some forecasts, it is expected to 0.8% while the PPI Input is expected to gain 1.3%, which is 0.4% less than last month’s value.

Another major news release that may increase the volatility of GBPUSD is “BOE Gov King Speaks” (March 11^th, 20:45GMT).

As for the US news releases, the volatility of GBPUSD usually increases during the Unemployment Claims release when there is a considerable gap between the actual data and the forecast. Trade Balance may also increase the volatility of the currency pair.

Moreover, it is necessary to constantly monitor the situation in the Middle East and Northern Africa as the areas are currently affecting the currency market because they are rich in crude oil reserves.