Sterling Remains in Tight Range Ahead of Bank of England Meeting

Cable yesterday remained within its well defined range created over the past 10 trading sessions, with a day high of 1.22804 and a low of 1.22045. It also managed to close higher than the previous session for a third consecutive increase; which is the first time in a month, when Sterling was trading above 1.3000 to the US dollar.

The pound has been under renewed pressure with talk of the Governor of the Bank of England ending his term prematurely in 2018. He had initially been hired for a full 8 year term ending in 2022. Those rumors seem to have been silenced as people close to Mike Carney have said they believe he will stay on to see out his full term.

The Bank of England will be holding a scheduled monetary policy meeting tomorrow, and announcement on interest rates will be made at 12pm. No change is expected given the stronger than expected economic data, but we also have the release of the Quarterly Inflation report. This could create expectations of future Bank policy if it contains comments indicating much higher or lower expectations.

At 12:30pm Mike Carney will be giving a speech, among the usual subject of economy and monetary policy comments we should also hear something as to his permanence as Bank Governor.

If you think the interest rate statement and speech will cause Sterling to rally higher then all you need to do is buy GBPUSD with Deal Cancellation protection. This feature allows you to take a position and set-up a maximum stop-loss, which if hit during the first hour, will cost you the premium you paid to buy Deal Cancellation protection.

Deal Cancellation gives you the option to close a trade, during 1 hour, losing no more than the premium you paid, while allowing you to gain from positive price movement. The screenshot below shows that to buy £28,000 with a stop loss of €316.58 would cost €17.57 in Deal Cancellation protection.

If the market goes up from 1.22411 you would be able to close your trade for a profit less the cost of the Deal Cancellation protection. Let’s say price rises to 1.23411, your profit would be €253.26 – €17.57 = €235.69, while your maximum risk, for 1 hour, would be €17.57.