0700 UK Interest Rate Decision - (unanimous to hold at 0.5%)57
Affliated Reports:
UK Asset Purchase Facility (unanimous to hold at 200B)32
We know that 3 members of the BOE have voted for a hike, this would
mean there needs to be 2 more members switching to the hawkis side
before there will be a hike. There was very good Service Sector PMI
figures earlier this wee, which makes up 80% of the UK economy, so
this is a good sign, but mostly likely not enough for the BOE to make
a move yet. Then there were quite bad Industrial and Manufacturing
Production figures, so really the 1st GDP readings for Q1 need to come
out to provide a better reading on how growth is doing, although MPC
member Bean has said even a good reading on this will not sway him, but
he is know as a dove, and has talked about raising the APF.Inflation is
very high, and government austerity and cuts are biting. The EuroZone
is set to hike and as this is the UK main trading partner it will make
inflation worse.
If they hike, GBPUSD will go up over 100 pips
If the cut, GBPUSD will go down over 100 pips
if they raise APF by 25B, GBPUSD should drop 50-70 pips
if the cut APF by 25B, GBPUSD should go up 50-70 pips
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0745 ECB Interest Rate Decision - (unanimous to hike 0.25% to 1.25%)
0830 ECB Press Conference
All 57 analysts on reported on Bloomberg expect the ECB to hike rates by
a 1/4 point today, this is based on the concern expressed during their last
Press Conference about inflation. The ECB's main mandate is price control,
as the history of Europe has seen episodes of uncontrolled inflation and
they will do whatever is necessary to avoid this. Indeed they are more
concerned about inflation than other factors which are effected by interest
rates, such as growth. So the main possibility of a surprise here is if they
decide not to cut, this is more likely than a 0.5% hike, and should see the
EURUSD,EURJPY and other EURO pairs sell off. There is a chance the Euro will
rally if they hike as expected as this will confirm the market's expectations,
however this will only be possible if the EURUSD is sitting at support when
the figure is released. It is possible they Euro will rally into the release
as there has been a sell off during today's European session. 15 minutes after
the figure is released, Trichet will hold a Press Conference. Based on his
words the market will listen for any hints of further hikes to come. This
Conference has provoked some good moves, sometime it can be difficult to assess
if what he is saying is hawkish or dovish as it can come down to the slightest
modification or words or even tone. Watch for breakout and the beginning of
momentum, don't look to fade moves, you will be surprise how far the momentum
can continue to carry price over the next hour.
If they hike 0.5%, EURUSD will go up 60-90 pips
If they hold, EURUSD will go down over 60-90 pips
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