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Tag Archives: BOE

TODAY 6PM @ Central Bank Communications Conference

An event organized by the ECB, bringing together the mightiest central bankers of the major currencies of the world together to TALK SHOP?!

Will we expect any surprises during this meeting or will all the central bankers keep a neutral tone on their respective monetary policies?

Let’s see where the different central bankers positions are at the moment: –

Yellen: the rate hike in December is a done deal and Wall Street has fully priced in the hike. Everyone is now speculating about the ‘path’; both speed and magnitude, this will move the financial markets.

Draghi: he keeps on maintaining a neutral position, saying that monetary policy could go either way depending on the needs of the Eurozone.  However, he did mention that the easy monetary policy is coming as the policy has produced positive economic results in the eurozone area supposedly far better than the USA.

Carney: he is also hinting about a rate hike but didn’t pull the trigger in the last BOE meeting.  Is the BOE deliberately keeping the GBP bidded?  We know that the UK economy is a services economy, a financial markets economy and an education economy. The education sector is rather inelastic, so even is the GBP is stronger, people who need to fund their children’s education in the UK will just keep on paying the higher exchange rate.  The services economy and financial markets economy is beginning to feel the exodus of firms moving out of the UK.  Volumes of trades in the financial markets for the time being is still stable.

Kuroda: no sign of monetary tightening from him. He keeps on reiterating that Japan will have no problem hitting its inflation target of 2%, but the fact is it’s still far away.  Abe’s 4 arrows economic policy had limited impact on the economy and thankfully, he has been re-elected, so any new arrows to look forward to?

The world seems to be in a state of flux both from the economic perspective and also from the monetary policy perspective.  Financial markets like the USA has gone crazy, with P/Es never seen before in the past 10 years.  Is liquidity channeling itself into the financial markets instead of the real economy?  It may appear to be so.

December 2017 will be rememberd in history as one of the pivotal months of the past 10 years.  I am not so sure traders will be closing their books just yet and miss out on what could be one of the best trading periods for the entire year.

Thank you BOE!

As it turned out, this was a classic case of buy on the rumor and sell on the fact.

When BOE announced the hike, plus the votes and keeping asset purchase flat, the GBPUSD went on a meltdown.

I took profit at 1.3120 for a trading profit of 115bps.

Many thanks BOE and GBPUSD!

Nov 2 @ Bought a one day put option on the GBPUSD expiring Friday, Nov 3rd

You know the classic story when they say buy on rumors and sell on fact.

Well, I felt that the GBPUSD kind of overshot, so I decided to gamble alittle by buying a small position by way of a put option for one day expiring on Friday, Nov 3rd with the following details: –

Strike at Spot: 1.3290

Premium: 55bps

Breakeven: 1.3235

Let’s see.

Sept 14th @ BOE Rate Decision

At 6:50pm, I placed my straddle trade with the following details: –

Stop if Offered at 1.3170, Spot at 1.3204, Stop if Bid at 1.3230

Correspondingly SLs at spot.

As it turned out, interest rate was kept on hold, so was the asset purchase.

Votes was the same at 7-2.

I suppose the financial markets took the two differeing votes as another constant from the last rate decision and concluded that it means the BOE is on firmer ground, I don’t know.

However, the GBP strengthened, triggering my Stop if Bid.

I squared the trade at 1.3333 for a trading profit of 103bps.

Thank you BOE or should I say, thank you High Street and Wall Street!

BOE done it again!

Market had almost priced in an interest rate cut of at least 0.25% some even speculating 0.50%.  However, the sensible cut would be 0.25% and the BOE did not disappoint.

Market was really waiting for whether or not the BOE will announce a larger asset purchase amount to pump more liquidity into the economy post Brexit to help boost the economy.

I decided to place a one leg straddle with the following details: –

GBPUSD:   Stop if Offered at 1.3300, Spot at 1.3325 and SL at 1.3330

As it turned out the interest rate cut didn’t really move the market, but what cause the floor from under the GBP to collapse was the announcement of an increase of 60Bn to the asset purchase program totaling 435Bn (previously, 375Bn).

My trade was triggered at within 5 minutes the GBPUSD was at 1.3172, I squared the position at 1.3185 for a trading profit of 115bps.  Thank you BOE, thank you Carney.

14 Jan @ BOE Rate Decision………….any surprises?!

The media buzz seems subdued going into the BOE rate decision at 8pm Asia time.

However, I decided to put a Long, Stop if Bid OTM just because……………

At 7:58pm; Spot 1.4388, Long Stop if Bid 1.4420, SL 1.4400

As it turned out, BOE decided not to rock the boat; rate same same at 0.50%, purchase facility at GBP375Mn…….both no change.

Policy statement, tilted slightly to the dovish side.

GBP hardly moved, so I decided to take out the trade.

It’s now 8:45pm and GBPUSD is trading at 1.4392………………..boring!

Looks like no more opportunities for the rest of the week.

I am going to spend Friday with my parents; lunch with my Dad and shopping and tea with my Mum.

Here’s wishing all a good weekend and let’s all get charged up for next week.

5 November @ BOE Rate Decision

Ok another central bank’s turn to create volatility in the marketplace.  BOE this week was squarely in the middle of the radar screen and of course, we should try and capture the volatility if it happens.

At about 7:54pm, I decided to place my straddle trade with the following details: –

GBPUSD   –   1.5365   –   1.5385   –   1.5405  with spot at 1.5385 and stop losses at 1.5385

When decision came out to hold and inflation targets to be adjusted, the GBP collapsed to 1.5270, triggering my stop if offered at 1.5365.

I decided to hold the position till after the start of the press conference.  Initially at the start of the press conference the GBP began climbing back up to 1.53295 and I thought maybe, I should square of the trade now and preserve my profits.

Then, with more comments from Carney talking about the fact that raising interest rates will be much further out in the horizon, the GBP went south again, and I decided to square off the trade at 1.5255.

Trading profits is 110bps……….RIGHT ON CARNEY!

Now to look forward to US unemployment claims in the next few minutes.

BOE Rate Decision!!!!!

Having a strong hunch that the BOE rate decision will be a volatile event, I decided to place a straddle trade at about 6:50pm: –

Spot: 1.5600

Stop if Bid; 1.5630, SL 1.5600

Stop if Offered; 1.5570, SL 1.5600

It was no surprise when the decision was announced, where the rate was held at 0.50% and asset purchase maintaining at 375Bn.

What is more important is what Carney is going to say.  I was of the opinion that he would talk the GBP up as the UK wanted to cool down property prices as the property market was showing signs of a bubble.  However, as it turned out the comments revolved around inflation and the fact that inflation went down to zero in June, rather far away from the target of 2%.  I believe the UK should adjust its target going forward much like the U.S.  In the case of the U.S., the inflation target was lowered from 2% to 1.6%.

Reasons given by Carney for the low inflation environment is because of low commodity prices and underutilized capacity.

As it turned out the GBP collapsed to a low of 1.5465, however, the real flows were at about 1.5488.

My trade was triggered but in the opposite direction from my hunch which was fine.  It triggered the offer trade at 1.5570, and I squared the position at 1.5500 for a trading profit of 70bps on a trade size of 3Bn.

The GBP is now rising back to 1.5530 on slightly elevated unemployment claims out of the U.S.

This is a great lesson in not trying to second guess what the central banker is going to do, or for that fact, what the data is going to be, what’s more important is to ascertain whether the event is going to be a volatile one or not and if it is, then, my fx strategy will ALWAYS work!

What a TRADE!  I am done for tonight!

 

12 February 2015 @ UK Inflation Report

The much waited UK inflation report to confirm whether or not BOE will or will not cut rates of hold rates of increase rates.

I really didn’t know whether the market was going to go because the last clue from the BOE was that they will stay put for a while and maybe even consider cutting rates.  However, the media had a different view.  All the media spots were gunning that the BOE would be more hawkish.

Since, this data has been put on the pedestal, I thought I might as well try to see whether I can squeeze a trade out of it or not.

Since, I had no inclination one way or another, I decided to put a straddle spot out of the money trade.

At about 6:20pm, I placed a stop if bid at 1.5250 and stop if offered at 1.5185 when spot was trading at 1.5220.

When the data came out the GBP shot up to 1.5320 within 15 minutes.  My stop if bid order was triggered at 1.5250, I decided to wait till about 9:30pm and squared the position at 1.5353 for a trading profit of 103bps.

Thank you BOE!

Is the USD oversold??????????????

The carnage on the USD started last Thursday and the three currencies that battered the USD the most was the GBP, EUR and the AUD.

The question is whether it was warranted or not, or was it simply a case of fund flows?  Or did the market move against the USD because the BOE, ECB and RBA moved from an accommodating stance to a neutral stance?  Is that enough to move the market so significantly?  I do not believe so.

Personally, I expected the other central banks to move to a neutral stance, given that the Federal Reserve has already begun cutting back QE by two tranches of $10Bn each from $85Bn to now $65Bn.

Is there an opportunity for the USD to take back some ground from the majors?  Yes, I believe so, and it has started today with the GBP giving back about 60bps so far.  I should have captured this opportunity since I felt so strongly about it.

Unfortunately, I was taken away to focus on my private equity business in a company I invested that is involved in the tocotrienol business.