31 Januari 2022, GBP/USD
GBPUSD trading plan:
Bank of England is widely expected to hike UK interest rates for the second time in less than three months this Thursday and double its main policy rate to 0.5% in the process. In August, the Bank announced it would start reducing its balance sheet once base rates hit 0.5% - much lower than the 1.5% threshold it had flagged previously. Bank of England to run down its balance sheet once rates rise because its main policy rate is the very rate it pays commercial banks for the central bank reserves created via bond buying. The resulting maturity mismatches on BoE assets and liabilities means sharply rising interest rates and a flattening yield curve could see the BoE incur losses the Treasury ultimately has to cover.
Investment idea: buy 1.3390 and take profit 1.3433.