Trading The GBP
Trading The British Pound (GBP): The United Kingdom has the Bank of England as the body responsible for governing the monetary issues of Britain. Like the Federal Reserve in the USA, the British governing body has an established committee where the bank’s governor is head. Nine members make up the committee including four external candidates, their appointment made by the direct office of the Chancellor of the Exchequer consisting of two deputy governors, a director of market operations, and a committee chief economist.
Monthly meetings of the Monetary Policy Committee (MPC), even when the House of Commons (the UK parliamentary body) is on Summer recess, are used to decide interest rates, monetary policy generally and specifically and keeping an eye on the rate consumer price inflation (CPI) is moving at, the aim being to contain it within 2% (much like the Euro) for national economic stability. Should the 2% benchmark be compromised, the Governor of The Bank of England must inform the Chancellor of the Exchequer. These announcements from the Governor of The Bank of England are often triggers for frenzied activity in the markets.
With more volatility than the neighboring euro, frequently the British pound (“pound sterling” or sometimes called “cable”) trades wider ranges through a day. Swings might be as large as 100-150 pips, though on quiet days the GBP might only trade with a 20-pip spread. Notable cross currency swings tend to give the British pound its reputation for volatility, especially pairings of GBP/JPY and GBP/CHF. The best action is observable over the London and US sessions, there being only minimal activity or movement between 5pm and 1am EST, which would be the hours of the Asian crossover.
