Average Earnings Index – BOE Inflation Report – Forex Trading News Events

Welcome to this week’s risk event video for the week beginning May the 11th 2015. This week we will be focusing on two key events happening in the UK on Wednesday the 13th of May. These are: Average Earnings Index and BOE Gov Carney speech

The first reason why these events are so important is because the UK elections are now over. The outcome was really positive for the GBP. The conservative government which is seen as a very business-friendly government got in.

Now the only one thing which could concern the markets over the coming months is this speculation of a referendum on whether or not Britain should be in the European Union. That could concern markets over the next year or two. However right now we are not expecting that to be a major concern because referendum is not expected for over a year. Still it is something you wanna keep your eye on because it probably will happen.

The other reason is because the data from these particular events will be very defining in terms of whether the Bank of England will hike their rate or not.

UK Average Earnings Index – Wednesday the 13th of May 9:30am

Average Earnings Index has been a key metric at the Bank of England to decide whether or not they are going to hike. It’s been fairly solid for a while apart from couple of negative months recently. Overall over the last 6 to 12 months Average Earnings has generally been quite solid which is pretty positive. Why is this big? Because if it’s positive, if it’s 1.7% or above we could see the GBP supported.

BOE Gov Carney Speaks/BOE Inflation Report – Wednesday the 13th of May 10:30am

Average Earnings Index will not drive the GBP through the session. The next event which is probably a little bit more important than Average Earnings Index is Bank of England governor Mark Carney’s speech. He will release the Bank of England and inflation report . What will it say? Will the Bank of England retain their tone? Or will they change their tone to something more negative or even something more positive? So will they go more dovish or will they go more hawkish? Or will they stay as they were?

At the moment they are fairly hawkish because they’ve stated that their next move will definitely gonna be a hike. They also said that they expect inflation to pick up through the summer of 2015. Thus, basically, if this is actually true, from now until August we should see UK CPR picking up. If Bank of England will not put off or delay their rate hike we could see GBP strengthened dramatically as increased speculation develops that the Bank of England are going to hike asap.

So why is this inflation report so important? Because it’s gonna give us an outlook of what the BOE is thinking in terms of UK inflation. Are they still confident that the inflation rate is gonna go up higher? Or have they lost a little bit a confidence after recent data points and the impact of oil? These are the big questions this session event will answer. This should give us some possible future direction on the GBP. If the report will be vague and kind of the same we might not see much but if they become a little bit more hawkish that could really be supportive to the GBP. Especially coming off the back of the UK election which were already so positive for the GBP.

So to sum up, Carney’s speech is not a risk event we are trading into but definitely the risk event we could possible trade out of.

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