at GMT 1200, GBP interest rate was reduced from 1.50% to 1.00%.
It’s a reduction hence should be negative for the currency?
But on the chart, it shot up from 1.4511 to 1.4648…
Shouldn’t it be decrease instead?
Need enlightenment thx guys!
Hey guys, can I add this?!
Got this quote from a Reuters news after EUR got battered on Thursday because of the BoE rate cut.
“If the US employment figures happen to come in better than expected on Friday, look out for even more pressure on the EUR.”
I am just wondering how is this type of economic report from the US correlates to the value assigned to GBP in relation to EUR?
Why would EUR face more pressure from GBP if the US employment figure report becomes better?
I hope you would have the time to explain, coz I’m really stupid when it comes to this kind of things. I just know how to follow the trend.
Thank you very much!
Lbrto
Remember you are trading the exchange rate. So, if one in the pair makes a move that reflects against the other. So, for instance, my pair is GPD/USD.
If USD goes down because of bad new and it’s bad enough, on the charts GPD could possibly go up in relation, even if nothing substantial happened to the GPD.
I like to think of it as two half glasses of water, where you pour one into the other and then back in varying amounts.
When considering news you have to consider both currencies in the pair.
Hey what does GPD stand for??
Interest rate changes don’t have the same impact they did a year ago, because there are other factors that have a lot more weight nowadays. Right now, lower interest rates may actually be seen as a positive for a currency because it is an effort to stimulate the economy. The question on everyone’s mind is who will weather the global recession the best, and come out on top when things begin to recover. And there’s always moves that cannot be explained by any economic rationale: only the people buying and selling could tell you why they are doing what they’re doing.
I’d like to add to this if I may.
In the ‘good old days’ (i.e. a year ago) an interest rake hike used to cause a move higher in the currency concerned because of the carry trade but the carry trade has all but ‘fallen apart’ over this period so this could also be a reason WHY things are not ‘behaving’ as they should (would) normally.
One other thing to consider is that a pair like GBP/JPY almost ALWAYS follows equities and an interest cut is ALSO almost ALWAYS positive for equities so when equities move higher on an interest rate cut then so does GBP/JPY (and for the most part other pairs like GBP/USD).
All of that being said: a lot of the so-called ‘correlations’ that we all became so familiar with have broken down so NOWADAYS there is NO guarantee that ‘what was’ will be ‘what is’.
Regards,
Dale. (forexbrokersonline.net).
i think phoenix has it right. The pairs have a strong correlation. Dale is also right and the smart money knows what pair to loook at in the markets and thats jpy pairs *carry pairs)
what i think is happening in the gbp is this
the eur getting beat up so much that is is strenthening the gbp and it is as simple as that. With the eur being so weak against the gbp, the gbp’s momentum is upward against the dollar and yen.
EUR/GBP
GBP/USD and GBP/JPY
Sorry, repeated typo. I meant GBP.
country then currency
GBP- Great Britain Pound
USD- United States Dollar
JPY- Japan Yen
and so forth
For this pair yesterday I searched on the internet I got some good indicators and charts on AVAFX. They are good and helped a lot to know the sentiments of this pair.
I really like Phoenix’s description of the 2 half glasses of water. I would rather draw on more realistic views of the world, no disrespect intended, and advise you to watch the news and trade the pullback.
The fact that the Euro has been publicly exposed as overpriced may also have some affect on the differences between the EUR/USD and the GBP/USD the last week or two. Guess it just depends on which currency sucks less and who’s doing the lending these days.
Hmm… could throw a couple other gems out there, but will continue doing my homework in hopes of being ready for what the coming week has to offer.
Phoenix, keep sharing brother, I am glad to see you’re still helping others and using good advice.
Good pippin,
Chubs
Wow, really! Thanks for sharing. I always wondered what that stuff was.
C’mon at least give us CHF, that one at least isn’t super obvious! 
CHF is the Native American currency that stand for Chief.
With all due respect, as a card holding “Native American”, please don’t encourage us to print our own currency. The U.S. Government doesn’t have a very nice way of dealing with us at it is.
Thanks… and good pippin,
Chubs
my take on this is a little different, its how i’ve been kinda trading and i hope im not wrong.
the GBP was reduced 50 points to 1.00%, but it was a number that was already ‘predicted’, if you look at the forex calendars, you’ll see that the estimated number is 1%.
so since the prediction was already 1%, the market would ‘prepare’ itself for a 1%. Since there was no difference between the expected, other factors come into play.
now obviously alot of traders look forward to the official bank rate because its where the market can change alot. and of course alot of people are READY and want to take the next winning trade. so even if the interest rate is the predicted rate, people will still get in the moment they have a sense of where the market is heading.
if i remember correctly, the technicals were showing an uptrend, and once it started to go up, i jumped into the trade and rode the uptrend.
for other interest rate news, there might have been ‘stunning’ data released an hour or half an hour before. since everybody is waiting for the interest rate results, they might hold off their trade until the rate is revealed. and when it is the same (or in the same ‘direction’ as the previous news release), they just trade the old news. (i hope i didnt lose you)
the way i use to trade news releases is not whether they drop or increase in relation to their previous releases, but in relation to their estimates. i use a plus/minus 25 basis points to trade: if the GBP rate became 0.75%, i would go short on GBPUSD. if it were 1.25% (better than the expected by 25 points), i would go long.
hope this helps! (btw i also agree that interest rates bear less weight nowadays, but soon carry trading will come back into play so no worries there :D)