Case-study: U.K. PMI (Service)

On Feb.4, the PMI report showed that the service industry continued to contract in January. The figure came better than average estimates.

U.K. Nationwide Consumer Confidence also dropped to record low. I made a small profit from selling gbpjpy before the report and I decided to close it soon after announcement of a new stimulus package from Australia.

Is it too late for playing BoE rate decision?

BoE is to set rate tomorrow when it is expected to leave it unchanged. Recent comments from MPC's members affected the market sentiment about the future of monetary policy in short term. Two month ago there was a significant possibility of a decrease in interest rate but today is completely different. Although the fundamental data have been even weaker but the policy makers are now clearly concerned about inflation and considered an interest rate rise at their last meeting.

It may explain that why today's drop in Nationwide consumer confidence was unable to change the minds of sterling buyers. Dollar weakness in recent days has been a catalyst helping sterling to appreciate almost one percent for the day.

So, why I can't buy the British pound with confidence? Because I am thinking on the other side; long term negative impact from high levels of interest rates on an economy which faces inflation, falling home prices and slowing consumer spending. I think there will be people who want to benefit by selling the currency at a relatively high price.

If I am true in analysis how I can translate it to profit? I see it too late to be a buyer, but after the decision there would be opportunities for selling the sterling when the entry time would be highly depended on technical data.

Taking 38 pips profit

It seems that I was lucky last night. My internet connection interrupted but it was not the case for the British pound depreciation! A combination of relatively weak economic data from Britain, especially Nationwide Consumer Confidence released last night, and a clearly more stable dollar brings GBPUSD to as low as 1.9539 today.

The price hits Take Profit at 1.9606, about 08:00 GMT, making 38 pips profit.

However I think the pound could rebound especially after interest rate decision meeting on Thursday, when the MPC is expected to keep it on 5 percent, concerning on inflation outlook in the medium term.





- Updated picture (8:00 am EDT) -

GBP and Nationwide Consumer Confidence

In less than 3 hours, the Nationwide Consumer Confidence will be released. Recent data was somewhat disappointing, almost every release came weaker than expected and it could be repeated again.

Remember last week that earlier data on consumer sentiment, GfK Consumer Confidence Survey, was weaker than estimated.At the same time dollar finds more support with better than expected Factory Orders and recent hawkish tone from the Fed (Bernanke today).

So I decided to go short on GBPUSD, opening at 1.9644 (it is about 20 pips below pivot line), with 35 pips for Stop Loss and 38 pips for Take Profit.