GBPJPY BUYS TO 194.600?
Trading Plan for GBP
BASELINE 🎯
Current short term sentiment bias and upcoming risk events (previous # & consensus expectations) that can impact said sentiment
Current Short-Term Sentiment Bias:
- The British pound is trading around $1.276, near a one-month high, driven by expectations of a cautious BoE.
- Investors are focused on upcoming UK economic data, particularly GDP and manufacturing production for October, which are expected to show modest growth.
Upcoming Risk Events:
- GDP (MoM) (Oct): Consensus 0.1%, Previous -0.1%
- GDP (YoY) (Oct): Consensus 1.6%, Previous 1.0%
- Industrial Production (YoY) (Oct): Consensus 0.2%, Previous -1.8%
- Industrial Production (MoM) (Oct): Consensus 0.3%, Previous -0.5%
- Manufacturing Production (MoM) (Oct): Consensus 0.2%, Previous -1.0%
- Manufacturing Production (YoY) (Oct): Consensus 0.9%, Previous -0.7%
- Monthly GDP 3M/3M Change (Oct): Consensus 0.2%, Previous 0.1%
SURPRISE ⚡
What outcome of the risk event will surprise the markets based on the baseline
Positive Data Surprise:
- Outcome: If the data beats expectations across the board, it will likely reinforce market expectations of no rate cuts next week.
- Market Reaction: Continued pound strength.
- Trade Pair: GBP/JPY - The yield spread between UK and Japan bonds suggests potential upside for this pair.
Negative Data Surprise:
- Outcome: If the data misses expectations, the pound could weaken as investors speculate on a more dovish BoE outlook.
- Market Reaction: Pound weakness.
- Trade Pair: GBP/NZD - The yield spread between UK and New Zealand bonds favors a downside move in this pair.
BIGGER PICTURE 🌐
Does this outcome changes the larger macro-fundamental bias
Macro-Fundamental Bias:
- Current Expectation: The BoE is expected to hold interest rates steady at 4.75% at its next meeting on December 19.
- Future Outlook: Governor Andrew Bailey has hinted at gradual rate cuts starting in 2025, with markets pricing in three 25-basis-point cuts by the end of next year.
- Implications: A positive data surprise would support the current expectation of no immediate rate cuts, while a negative surprise could lead to speculation about a more dovish stance from the BoE.
BASELINE 🎯
Current short term sentiment bias and upcoming risk events (previous # & consensus expectations) that can impact said sentiment
Current Short-Term Sentiment Bias:
- The British pound is trading around $1.276, near a one-month high, driven by expectations of a cautious BoE.
- Investors are focused on upcoming UK economic data, particularly GDP and manufacturing production for October, which are expected to show modest growth.
Upcoming Risk Events:
- GDP (MoM) (Oct): Consensus 0.1%, Previous -0.1%
- GDP (YoY) (Oct): Consensus 1.6%, Previous 1.0%
- Industrial Production (YoY) (Oct): Consensus 0.2%, Previous -1.8%
- Industrial Production (MoM) (Oct): Consensus 0.3%, Previous -0.5%
- Manufacturing Production (MoM) (Oct): Consensus 0.2%, Previous -1.0%
- Manufacturing Production (YoY) (Oct): Consensus 0.9%, Previous -0.7%
- Monthly GDP 3M/3M Change (Oct): Consensus 0.2%, Previous 0.1%
SURPRISE ⚡
What outcome of the risk event will surprise the markets based on the baseline
Positive Data Surprise:
- Outcome: If the data beats expectations across the board, it will likely reinforce market expectations of no rate cuts next week.
- Market Reaction: Continued pound strength.
- Trade Pair: GBP/JPY - The yield spread between UK and Japan bonds suggests potential upside for this pair.
Negative Data Surprise:
- Outcome: If the data misses expectations, the pound could weaken as investors speculate on a more dovish BoE outlook.
- Market Reaction: Pound weakness.
- Trade Pair: GBP/NZD - The yield spread between UK and New Zealand bonds favors a downside move in this pair.
BIGGER PICTURE 🌐
Does this outcome changes the larger macro-fundamental bias
Macro-Fundamental Bias:
- Current Expectation: The BoE is expected to hold interest rates steady at 4.75% at its next meeting on December 19.
- Future Outlook: Governor Andrew Bailey has hinted at gradual rate cuts starting in 2025, with markets pricing in three 25-basis-point cuts by the end of next year.
- Implications: A positive data surprise would support the current expectation of no immediate rate cuts, while a negative surprise could lead to speculation about a more dovish stance from the BoE.
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