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How to Trade the Central Banker Meetings

Sunday, 3 Apr 2011 | 10:02 PM ET

Hankering for some central bank jargon? Well, the week of April 4 is for you, with no fewer than seven central bank meetings and nine Fed officials scheduled to speak.

So how do you trade all this activity?

"This is all about anticipation," said Andrew Busch, global currency and public policy strategist for BMO Capital Markets. Next week the big one isn't the Fed. It isn't anyone else except for the ECB," he told CNBC's Melissa Lee. The European Central Bank, he said, has been "banging the drum that they're going to raise rates" since they have a clear mandate to fight inflation. This is driving up the euro.

But that anticipation of higher rates is priced into the single currency, said Rebecca Patterson, global head of currencies and commodities for J.P. Morgan's private bank. She thinks there is downside risk in the euro once any rate hike is announced.

Busch agreed, and recommended a way to take advantage of that anticipation: trading a trend channel, where a currency pair moves up and down in a fairly steady pattern. The euro and the British pound, he said, have hit both sides of a 170-point-wide trend channel four times. So he recommends selling the euro against the pound when it is at the upper end of the channel, around 0.8800, with a stop loss at 0.8905 and a target of 0.8720.

Patterson agreed, and pointed out that the Bank of England is meeting next week and no one expects an interest rate hike there. That means if British officials say anything hawkish, it could boost the pound and help the trade. You can listen to the discussion right here.

Money Match Up
How currency traders are playing the economic recovery. And a look at the peso/yen trade, as well as the euro and the British pound, with CNBC's Melissa Lee and the Money In Motion traders.

CURRENCY FUTURES

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm.

"Money in Motion Currency Trading" repeats on Saturdays at 7pm.

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