Results of Interest Rate Day and Whats Ahead?

Posted on February 7th, 2008 by Yours Truly under Investing

As anticipated and forecasted, the BOE cut interest rates by 25bp to 5.25% and ECB left rates unchanged at 4%.

GBP:

At the moment, the Bank of England is more concerned that slowing growth will bring inflation below target and suggested that more rate cuts may loom on the horizon as long as economic data points to deteriorating conditions following the lead of the American counterparts. Similarly to the USD, the pound is heading towards a period of slowing growth and its time to short it.

EUR:
Even though interest rates remained unchanged, ECB President Jean-Claude Trichet appeared to soften his previous hawkish stance on rates, noting that risks to growth in the euro zone were on the rise. Analysts increasingly believe the ECB will have to cut rates later this year despite rising inflation. Trichet stressed multiple times that the risk to growth is to downside and uncertainty about market turmoil is usually high which triggered the massive sell-off of the EUR/USD. Look for a period of moderate rise in the EUR/USD but mainly trading within a narrow band pending further economic news but for the short-term, its good to go short as the momentum is favouring the down trend.

Trading:

At the moment, there looks to be a relatively good amount of trading opportunities with the majority of the event driven news out of the way. At the moment, I am looking at a short on the EUR/JPY on the 1-hour downtrend and since its a Friday, 1-hr is perfect for an intraday trade with all the profit-taking that goes on during the mid-session of the NY open.

Another trading setup is the EUR/GBP (my fav. pair) on the Daily charts forming a flag formation again and a break to the upside past the .7500 region would signal another buy opprtunity possibiy to at least the 0.7600 region.