This week’s “high impact” news event that I will be looking to trade is as follows;
Thursday 12th February 2015
GBP – BoE Inflation Report, BoE Inflation letter & BoE Gov Carney Speaks - 10:30am
The inflation letter has to be sent to the Chancellor of the UK to explain why it is outside of its targeted band, but more importantly he will have to explain what he is going to do to address the issue.

The Bank of England is in a very interesting situation at the moment as it is the second bank expected to hike after the Federal Reserve – as such they have taken quite a staunch stance disregarding inflation and accrediting the drop to oil prices and instead they have reiterated that their focus is on wage growth, which of course has been improving. If jobs data continues to be positive with some attention on the importance for a rise in GDP we could be in a situation whereby despite falling inflation the markets left speculating the imminence of a tightening of policy by the Bank of England.

Any rate hikes wouldn’t be feasible before the latter part of 2015 but it will certainly be before anyone else considering all its major peers except the Fed are cutting rates, once the market gets over the US hike it will begin to question who is next.

If the inflation report is a continuation of their previous report i.e. they acknowledge the drop in inflation, comment on their lack of concern and advise it’s temporary – whilst maintaining that ultimately they are still on course with their plans for monetary policy.

The above statement could see a nice positive up surge for the GBP, this is a risk event that I feel we could trade into by buying the GBP ahead of this inflation report as there is nothing to suggest that the Bank of England will change their tone.

Of course there is a higher risk with this as if they do change their tone you want to be making sure that you are getting out of any GBP positions, I also wouldn’t be trading cable and instead would pick a clearly weaker currency such as GBP/JPY, GBP/CAD or perhaps GBP/AUD any currency whose next anticipated move is a rate cut.