Look for the change
If you are relatively new to trading and trying to understand what moves currency markets here is a simple lesson that you can take with you through your trading journey. Everyone has to learn sometime and, given how little facility there really is for retail learning, here is a bit of guidance on the topic of trading central bank comments.
Last week there was a strong run higher in the GBP. Why? It was because the Bank of England's Vlieghe has taken a more hawkish shift from his neutral perspective.
The key comment was that he expected the UK to transition out of furlough scheme more smoothly than expected and that a somewhat earlier rate rise would be appropriate.
So, what's the point. Well the point is here is what you want to see in a central bank comment that has a definite shift in perspective. So, prior to this comment last week Vlieghe was seen as having a neutral perspective being neither bullish or bearish. However, the comment made was decidedly bullish as he was making a case for an earlier rate rise,
Do you see the significance? It is not so much the comment that makes the impact as the change in perspective. So, here is a silly example. One of my friends supports Liverpool FC. Now I support Southampton FC alongside my son.For those of you who don't know it - most of Southampton best players go to Liverpool. It's annoying. Liverpoolhave a saying that they will 'never walk alone' The reason is because there is always a new Southampton player around to give them company. (Sadio Mane, Dejan Lovren, Virgil Van Dyke, Lllana)So, my friend is always supporting Liverpool. I'm used to it. However, one day when my son starts supporting Liverpool because they are successful you can imagine how low my heart sunk!The change in perspective is significant !
It's the same in trading central bank speakers minutes - look for the change in perspective.
This is a hawkish shift from a neutral BoE member and a shift from his earlier position on the path of the UK's monetary policy. EURGBP downside is now favoured.