All eyes will look to the Bank of England today
All eyes will look to the Bank of England today to see if
there is any change to interest rates and more importantly the Quantitative
Easing program. Currently the UK’s QE programme sits at £325Bn and there have
been calls by several members of the MPC to increase this further by the tune
of another £50Bn. As things are poised at the moment I would be greatly
surprised to any movements in either the interest rate or Quantitative Easing
fund. The announcement due out at midday will probably leave markets waiting a
few weeks to see the next minutes before getting a further idea of the Bank of
England’s plans.
The Euro continues to find itself under pressure and the
problems in the Eurozone don’t looking to be going away anytime soon. The ECB
left its benchmark rate on hold at 1% yesterday, but Mario Draghi’s press
conference painted a very bleak picture for the Eurozone going forward. Over
the last few days we have continued to see bond yields widen which won’t be off
help to under pressure nations such as Spain, Italy and Portugal.
Despite the long weekend the currency market will still
trade and we would usually expect to see a small amount of movement over the
period. Depending on any news released over the next few days it would be
possible to see some sharp movements as trading volumes will be a lot thinner
over this period. Looking forward over the quarter I would expect to see
another run down in EUR/USD and we should see sustained periods below
1.30. This should allow GBP/EUR room to manoeuvre to the upside but gains could
be limited as UK policy makers won’t want to see Sterling losing any
competitive edge it has had by being a little weaker than it probably should be
at the moment. If we do see a move lower in EUR/USD you can almost certainly
say that GBP/USD will also follow this but to a smaller percentage.
GBP/EUR is starting to get interesting again » « EUR/USD has continued its downward trend