MARKET REVIEW WEEK 05 – 09 February 2018

This week trading will be focusing on the 3 banks monetary policy meetings. The RBA is holding their meeting on Tuesday the 6th, as all central banks are focusing on low inflation in order to produce their policies. 4th quarter numbers showed the CPI up by 0.6%, an annualized gain of 1.9%. Expectations beforehand were for increases of 0.7% and 2%, respectively. RBA is targeting a 2-3% band. Taking this into account, expectation for keeping rates at record low of 1.50% are very high and priced in AUD exchange rate with its counterparties. For this policy meeting there are prediction that could trigger the interest rate down to 1.48%. As this is not priced in, a possible rate cut will push AUD down from current exchange levels. On the other hand, a surprising hawkish statement will push AUD higher.

On Wednesday 7th we will keep our eye on the RBNZ policy statement and press conference, although no action is expected to be taken, we may see the NZD becoming stronger after the meeting, and this will be due to the success of Prime Minister Jacinda Arern, to complete her coalition and to implement her 100 days government plan.

Running through Thursday 8th the well know super Thursday for GBP price action, all eyes will be on the BOE monetary policy and interest rate decision. Last month’s meeting read a number of 9 out of 9 MPC voting no change in interest rate. As for this Thursday, the prediction is for a 2 to 9 vote for a rate hike. It is unlikely that BOE will increase rates at this meeting, but any vote more than 2 for rate hike will push the GBP exchange rate into new highs.

Technical speaking GBP/USD is still pointing higher and we maintain our point of view as bullish. At the current level we give a neutral stance until the exchange rate falls well inside the last one-year uptrend channel.  A cautious buy is standing at 1.3991, with the next buy opportunity found at 1.3800 and strong buy at 1.3623