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How to Trade the Central Bank Meeting Blitz

Friday, 19 Oct 2012 | 7:38 PM ET

Five central banks will meet in the next week, and these strategists have trading plans.

What's more exciting than a week of central bank meetings? A week of central bank meetings where no significant policy changes are expected. The blitz starts Tuesday with the Bank of Canada, and continues with the U.S., New Zealand, Sweden, and Mexico. The trick is how to trade on all the confabs.

Andrew Busch, global currency and public policy strategist at BMO Capital Markets, will have his ear to the ground.

"We're going to be parsing the language because nobody expects them to act," he told CNBC's Amanda Drury. Busch is especially interested in the Bank of Canada meeting, since officials there recently warned that they may have to cut theirgrowth forecasts and Canadian CPI has been soft. Also, he points out, "the Canadian dollar has had a pretty good week this week."

Rebecca Patterson, chief investment officer at Bessemer Trust, is watching Mexico. The economy has been surprisingly strong, she says, and inflation has been rising. But the central bank is averse to interest rate changes to keep things in check, preferring to let a strong peso do the job, she says.

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Mexico has other advantages, Patterson says. Short-term yields at 4.5% "feel like a gift" to investors, and she thinks the peso is currency undervalued. "If you get a selloff in the peso, I think you want to buy it, because people are greedy enough for yield that they're going to be buying those dips," she says.

Patterson wants to get into a trade on a pullback to 12.9800 and aim for a move down to 12.6000, which she considers fair value. She recommends a stop at 13.2000.

Tracking Currencies

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Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Terms Dictionary. Top currency strategies are broken down for you in Currency Class.

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