FXB (GBP) Signal - Jan. 28, 2013

By: Andrew Keene

Poorer than expected data released Friday could fuel further selling of the GBP (ETF: FXB), as the UK Office for National Statistics (ONS) reported GDP declined by .3% as opposed the expected .1%. Should further contraction occur in Q1 2013, the UK economy will have the dubious distinction of having officially entered a triple dip recession. A recent revision trimmed 2011 growth by .1% to .7%, compounding an already gloomy economic picture.

Recent remarks by incoming Bank of England Governor Mark Carney fueled pessimism, as he stated his mission to be less to control inflation and more growth focused. Data suggesting an ease in inflation will also pave the way for further quantitative easing by the BOE which recently maintained its at purchase program at 375 B pounds, purchases under which were completed in November.

Finally, Standard and Poors stated last month a 1/3 chance that it will downgrade the UK's credit rating in the 2 years, citing the debt-to-GDP ratio as the causal factor should recovery continue to miss expectations.

My trade:
March 155-152 Put Spread
Risk: $90 per 1 Lot
Reward: $210 per 1 Lot
Breakeven: $154.10

Andrew Keene
Andrew Keene spent 10 years as an independent equity options trader on the Chicago Board of Options Exchange, during which he spent the majority of his time as a market-maker for over 125 stocks. Andrew currently trades futures, currencies and commodities. When he's not trading, Andrew appears on top business television shows including CNBC's Squawk on the Street, Street Smart on Bloomberg TV and First Business, a show that is syndicated across the United States. Andrew graduated from the University of Illinois with a degree in Finance with a concentration in Accountancy.