bbmac
Veteren member
- Messages
- 3,584
- Likes
- 789
market commentary
LONDON (Dow Jones)--Key currencies have held steady in European trading hours, with investors bracing for key event risks from U.K. and euro-zone central banks later in the day.
The Bank of England is due to announce the results of its monetary policy meeting at 1100 GMT, while the European Central Bank makes its announcement at 1145 GMT, with a press conference starting at 1230 GMT. In the absence of key data in the runup to those events, major currencies showed few signs of life for most of the trading session, with the euro shifting little from the $1.44 area, the dollar straying little from Y95 and sterling tucked just under $1.70.
This period of calm could prove to be short-lived. In particular, the Bank of England's announcement seems set to shift the pound around, whatever the outcome.
No one expects the BOE to move policy rates from their current record low at 0.5%. But economists are split as to what the central bank will do with its quantitative easing program.
It has several options, each of which is likely to provoke a reaction in the currencies market. It could, especially given a run of positive U.K. data Wednesday, judge that it doesn't need to make any more asset purchases, at least for now - an outcome that would likely boost the pound as investors bet that the U.K. is set to leap out of recession.
It could, on the other hand, increase its asset purchases - most likely by GBP25 billion over the next month to a total of GBP150 billion. That would likely prompt sterling selling, at least in the short term.
Barclays Capital said the trickiest option for the market to read would be a smaller-than-expected increase to the easing program, with indications that it might halt purchases soon. "The knee-jerk reaction would probably be sterling negative, but this could be a strong buying opportunity," the bank said.
For the European Central Bank, again, economists expect no change in the key policy rate at 1%. However, traders will be scrutinizing the ECB's press conference for signs that the central bank may be considering withdrawing liquidity from the financial system. With data mixed, and with comments from the ECB largely indicating that the central bank is waiting to see the full effects of its asset purchases so far, a shift is seen as unlikely.
"If one was looking for a reason to expect further upside momentum in the euro [against the dollar], today's ECB meeting is unlikely to be it," said analysts at Societe Generale in a note to clients.
The bigger risk, perhaps, is that the ECB could signal unease over the euro's recent climb.
"Recent euro strength has not been a welcome development for the region's manufacturers and a more dovish tone, or even outright reference to undesirable euro strength, could put more downward pressure on the euro," said analysts at UBS.
-By Katie Martin, Dow Jones Newswires; 44 20 7842 9346; [email protected]
LONDON (Dow Jones)--Key currencies have held steady in European trading hours, with investors bracing for key event risks from U.K. and euro-zone central banks later in the day.
The Bank of England is due to announce the results of its monetary policy meeting at 1100 GMT, while the European Central Bank makes its announcement at 1145 GMT, with a press conference starting at 1230 GMT. In the absence of key data in the runup to those events, major currencies showed few signs of life for most of the trading session, with the euro shifting little from the $1.44 area, the dollar straying little from Y95 and sterling tucked just under $1.70.
This period of calm could prove to be short-lived. In particular, the Bank of England's announcement seems set to shift the pound around, whatever the outcome.
No one expects the BOE to move policy rates from their current record low at 0.5%. But economists are split as to what the central bank will do with its quantitative easing program.
It has several options, each of which is likely to provoke a reaction in the currencies market. It could, especially given a run of positive U.K. data Wednesday, judge that it doesn't need to make any more asset purchases, at least for now - an outcome that would likely boost the pound as investors bet that the U.K. is set to leap out of recession.
It could, on the other hand, increase its asset purchases - most likely by GBP25 billion over the next month to a total of GBP150 billion. That would likely prompt sterling selling, at least in the short term.
Barclays Capital said the trickiest option for the market to read would be a smaller-than-expected increase to the easing program, with indications that it might halt purchases soon. "The knee-jerk reaction would probably be sterling negative, but this could be a strong buying opportunity," the bank said.
For the European Central Bank, again, economists expect no change in the key policy rate at 1%. However, traders will be scrutinizing the ECB's press conference for signs that the central bank may be considering withdrawing liquidity from the financial system. With data mixed, and with comments from the ECB largely indicating that the central bank is waiting to see the full effects of its asset purchases so far, a shift is seen as unlikely.
"If one was looking for a reason to expect further upside momentum in the euro [against the dollar], today's ECB meeting is unlikely to be it," said analysts at Societe Generale in a note to clients.
The bigger risk, perhaps, is that the ECB could signal unease over the euro's recent climb.
"Recent euro strength has not been a welcome development for the region's manufacturers and a more dovish tone, or even outright reference to undesirable euro strength, could put more downward pressure on the euro," said analysts at UBS.
-By Katie Martin, Dow Jones Newswires; 44 20 7842 9346; [email protected]
Keep it up Bbmac!
