7 Aug 2013
Flash: BoE or how to hypnotize a market – Societe General
FXstreet.com (Barcelona) - Sebastien Galy, strategist at Societe Generale said it's very much the Fed 2.0 but more prudent.
Key Quotes:
“The BoE introduced forward guidance with a 7 percent unemployment target that does not automatically mean an increase in interest rate. There are three knockouts (he is an IB man). 1. Inflation abvove target 2. Unanchored medium term inflation expectations 3. Threat to financial stability. Brian Hilliard will have far more”.
“Expectations of rate hikes have been pushed back from 2015 to 2016. EURGBP jumped higher. Rejecting the transition into the 0.86 0.84 region but the move above 0.87 is already receding”.
“It is strong stuff to some extent but it was widely expected. Crush EURGBP vols or GBPCHF vols may well be the trick after the BoE cleared the uncertainty and is implictly capping GBP potential gains vs EUR. They even given you a path for the rates process if you can model the underlying inflation process”.
“We still have a BoJ to wait for, little is expected. There the jitters come from profit taking in the Nikkei. I presume it is mainly linked to duration reductions globally which create negative shocks in equities. It is more difficult to guide the market when policy is loose in a slowdown than a recovery”.
Key Quotes:
“The BoE introduced forward guidance with a 7 percent unemployment target that does not automatically mean an increase in interest rate. There are three knockouts (he is an IB man). 1. Inflation abvove target 2. Unanchored medium term inflation expectations 3. Threat to financial stability. Brian Hilliard will have far more”.
“Expectations of rate hikes have been pushed back from 2015 to 2016. EURGBP jumped higher. Rejecting the transition into the 0.86 0.84 region but the move above 0.87 is already receding”.
“It is strong stuff to some extent but it was widely expected. Crush EURGBP vols or GBPCHF vols may well be the trick after the BoE cleared the uncertainty and is implictly capping GBP potential gains vs EUR. They even given you a path for the rates process if you can model the underlying inflation process”.
“We still have a BoJ to wait for, little is expected. There the jitters come from profit taking in the Nikkei. I presume it is mainly linked to duration reductions globally which create negative shocks in equities. It is more difficult to guide the market when policy is loose in a slowdown than a recovery”.