 Hello and welcome to CMC Markets in this upcoming preview of the Bank of England rate meeting which is due later this month on the 14th of July. Now after the volatility that we've seen over the past few days I don't think it would be any surprise if the Bank of England cut rates from the already historically low 0.5% to 0.25% but there's also a part of me that wouldn't be surprised if interest rates stayed on hold and I think there's a simple reasoning behind that. A rate cut so soon I think would come across as a somewhat knee jerk reaction particularly since market rates have already fallen quite sharply. Let's just wind ourselves back to the 23rd of June. UK guilt yields were trading at 1.37% and now below 0.8% so market rates have already fallen quite sharply. Now some would argue that's on the basis that the markets are pricing in an interest rate cut and that is there is certainly an element of truth in that but there's also the fact that Mark Carney has gone to great lengths to make sure that credit conditions are much easier and will stay much easier for quite some time to come with special monthly auction liquidity auctions which basically are keeping a lid on the cost of credit on a week on week basis. So ultimately market rates are already lower so he's already indicated that is the Bank of England's sole priority at the moment which suggests to me that that is more important than the headline rate and we should also bear in mind that we have the latest inflation report due out in August which means that I would suggest it's probably more likely we'll get a move on rates if we're going to get one at all in August rather than July. Now some will point to the fact that consumer confidence has fallen back quite sharply but that's not really surprising given the amount of negative media and ultimately confidence indicators are flaky at the best of times. So my focus is really going to be more on what Mark Carney said at the financial stability meeting earlier this month and he stated that low rates can be counterproductive in that they reduce bank profitability and in the process can actually limit credit availability because banks become more risk averse and we've got no better example of that than what's happening right now in Europe. Concerns about Italian banks, concerns about the profitability of the two biggest Swiss lenders of Credit Suisse and UBS but also concerns about the profitability of Germany's Deutsche Bank. So I don't think that a UK rate cut later this month is the done deal that people think that it necessarily could be. The bank could extend the funding for lending programme it could argue that it remains prepared to act to keep liquidity flowing irrespective of the headline rate. So let's look at some of the key levels on the pound against the dollar in the event that the bank surprises with no action at all. On the cable we can see the sharp down move in the wake of the referendum result. Since then we've made new 31 year lows at just below 128 since then we've struggled to get back much above 130 but certainly we do have scope to retrace quite a bit further all the way back to 130.50 which was the highs that we saw on Thursday the 7th of July but also this series of lows that we saw at the end of June around about 130.120, 130.150 we could well conceivably squeeze all the way back there if the Bank of England surprises by not moving on rates and what we want the bank won't want to do is prompt a run on the pound and I think they do need to be aware of that if they cut rates so soon after announcing all these extra liquidity provisions that could actually precipitate a sharp sterling decline which they don't want and prompt accusations of currency manipulation. Let's also look at sterling in because I think this is significant as well again it's showing significant signs of weakness and while I don't rule out further weakness given the fact that most people in the market expect sterling in to decline further the risk of a short squeeze is very very real so again here there's 133.75 resistance level we also have to be aware of the prospect of a potential short squeeze as a result of intervention in Dolly N which could push sterling in higher so again here we do need to be very very aware that we could get a surprise short squeeze come about as a result of a surprise intervention by the Bank of Japan and sterling in or a surprise rate hold by the Bank of England next week