Central Bankers On The Wires
Our last forecast for binary trading for this week will dive into the GBP/USD pair – as we are drawing closer to the appointment of Mark Carney as head of the Bank Of England, the pound sterling is likely to be burdened – policymakers are likely to be willing to keep exports of the UK economy competitive by keeping the currency lower.
The Bank of England Executive director Paul Fisher stated earlier today that a faster rate of growth in the near term might keep inflation at bay and there are some signs of economic pick-up.
New York’s session high has been marked at 1.5130
Overnight the pair traded in a rather tight range with the highs in the Asian session having been set at 1.5115 and the lower part of the range ending up around 1.5065. New York’s session high has been marked at 1.5130 on the fed comments which tampered expectations for a quick withdrawal of monetary policy accommodation.
Paul Fisher downplayed the economic recovery so far, stating that trend growth rate was something like 0.6% rather than the 0.3% reported in the first quarter. Mr. Tucker is advocating more stimulus policies, but cutting rates is not in the central banks arsenal that he would like to use. This implies for more quantitative measures, as a rate cut could boost demand further leading to perverse effects on the economy. As past minutes have revealed Paul Fisher is one of the three members of the Monetary Policy Committee who has been voting for additional GBP 25bln in quantitative easing.
News wires reported some Federal Reserve talk yesterday which reassured investors that there will be no such thing as a hastily withdrawal of monetary stimulus. The Fed officials stressed that there is no rush to exit and they are not in “autopilot” mode.
Another central banker stated that the FED could adjust the volume of bond purchases, yet he did not imply a direction that they could take – it still could be as Bernanke said the other day – up or down, depending on the evolution of the economic outlook. Federal reserve president of St. Louis James Bullard stated that he did not think the Fed was close to taking such action while speaking in London.
Earlier this week Bernanke clearly communicated that the central bank is in no rush whatsoever to withdraw monetary stimulus as he stressed on the risks surrounding a premature exit of the FED. All in all it is clear that the Federal Reserve Open Market Committee members will wait for a more clear evidence of the U.S. economy picking up before deciding to taper off their bond purchases.
Looking at the chart we can clearly observe a tight range this morning, with our bias being to buy calls on dips, unless we get an hourly break above 1.5120. Should that happen, we will be waiting for the price to dip towards 1.5115-20 to purchase our call options at decent prices. A return towards 1.5070 would confirm potential for a break of 1.5060 which will reverse our bias strategy to selling puts.