Tuesday, 23 Jun 2009

GBP - Inflation Report Hearings - 2nd Quarter

The British Inflation Hearings or Treasury Committee Hearings is set to take place at the British Parliament's Treasury Committee this Wednesday at 13:30 GMT. The main issue set to be discussed by Bank of England (BoE) Governor Mervyn King is inflation.  

The hearings are set to lead to high volatility in the forex market. Therefore, the implications for the Pound will be very strong. There is also set to be additional statements with Chief Cahier Andrew Bailey Director of Financial Markets Andrew Haldane. Throughout the "Hearings," constant reference will be made to the Pound and currency market. The event is important to forex traders, as BoE MPC (Monetary Policy committee) members cast their vote on where to set Britain's Interest Rates. Indications are also made to Britain's future monetary policy. In Tuesday's trading, the GBP/USD is trading lower for a second day and stands at 1.6254. The Pound's losses have extended against the EUR too, as the pair is trading down by 80 pips at 0.8571. The reasons for the bearish Pound since this week's commencement are due to several reasons. The global energy sector is bearish, which hurts the Pound due to Britain being dominant on this sector. Fears have been renewed about prolongation of the recession due to pessimistic forecasts from the World Bank. If the hearings are more optimistic than forecast, the GBP is likely to benefit. However, if the report's results are pessimistic, then the GBP is likely to go bearish as a response. Range trading of the GBP/USD between the 1.6200-1.6600 levels is a likely response to the hearings.