GBP/USD Trade

It was a big day for the pound today due to the interest rate decision announcement from the Bank of England at 12pm (GMT) which investors have been focusing on for the past few days. With the ECB hinting last week that interest rates in the Eurozone were very likely to increase in April, there was speculation in the markets that the BOE would also increase interest rates either today or next month. 

How I Traded This News Event

Thursday started out with a strengthening of the US dollar and a change in sentiment towards it. The US dollar was up against most other currencies and looking to push higher still. The pound had been sliding lower over the previous few days but mustered a rally before the announcement. I was expecting the BOE to leave interest rates unchanged despite worries over inflation as the UK has recorded one quarter of negative growth already and an increase in interest rates would surely push the UK back into recession, the last thing the BOE wants on it’s hands. With the dollar strength in the market I knew this type of announcement would probably lead to a fairly big sell off on the GBP/USD pairing. I would have to wait, however, until after the announcement before entering to confirm that there was no shock increase in rates. 

Let’s see how this played out: 

After the announcement made it clear that there were to be no interest rate increases in the near future I sold immediately at 1.6162. I placed my stop loss 30 pips higher than this point at 1.6192 as I felt that if the rate went up to this level it would be clear that the trade idea was flawed. My first target price was at the intraday low at 1.6122 and this was hit around half an hour later. I would usually decide to take half of the position off the table here and let the other half of the position run until I see a green 15min candle. So my second price target would usually have been 1.6088 but I decided to take all my position off when it hit my first price target as it has been a very good week for me. 

Eventual gain on this trade was 40 pips whilst risking 30 pips. As I risked 2% on this trade I made a final profit of 2.67%. As my premium members were also involved in this trade, this will be my first entry into the trading log.