EUR/USD drew a line in the sand for 2012 at 1.2665 This will be the level it needs to break below to open a new downward move #fx #forex $$
It’s probably a case today of the Central Banks in the limelight, the ECB and the Bank of England sitting on their laurels as they contemplate their past actions but also waiting for further evidence that extra measures may be needed to stimulate economic activity. The scenario is set for Eurozone interest rates to fall in the coming months by another 0.50% (two cuts of 0.25%) where rates will match those of the UK with both Central Banks having to consider increased quantitative easing, or bond purchases in European language. The Bank of England will be leaving rates untouched today with the analysts and central banks watchers looking for those fresh clues on the timing of “qe.” The Bank of England remains on target for a further £50bn of “qe” in February to be conducted over the following three month period. Sterling’s recent appreciation on the exchanges may be starting to hit their radar screens, in particular the effect it will have on future UK inflation levels (a fall back to 3% may be on the cards quicker than anticipated) but it could also generate some problems for exporters. One problem eases, another one intensifies.
The ECB’s President Mario Draghi still has a tricky balancing act ahead of him and with no changes being announced at 12.45hrs by the ECB, the press conference at 13.30hrs clearly has the lions’ share of markets interest. The ongoing reluctance of European Banks to lend all their recent gained funds from the ECB under their 3 year Long Term Refinancing Operation (LTRO) at considerably better rates than they are achieving by lending it back to the ECB reflects a picture of a continued lack of confidence in the ability of Eurozone leaders to find a solution and quell the debt crisis. A lot resting in Draghi’s hands for the future.
Bond auctions again over the next two days by Italy (€12bn today short term and €4bn long term tomorrow) and Spain (€4bn long term 3 and 4 years) will be followed closely by the markets, but coming back into the fray is Greece’s possible default scenario at the end of March.
A few numbers out there today as well to catch the markets attention with UK industrial and manufacturing production data at 09.30hrs, Eurozone industrial production data at 10.00hrs and US retail sales figures at 13.30hrs along with US weekly jobs claims. Later this afternoon which might attract the attention of some UK analysts is the NIESR estimate of UK GDP.
Chinese inflation data published much earlier this morning saw CPI cooling to a 15 month low of 4.1% in December( last 4.2%)and potentially leading to an easing of monetary policy by the Chinese Central Bank. Relatively little impact on Asian markets in trading this morning after the data.
Considering all that is going on and still to happen, markets have been fairly calm with the dollar still looking likely to be the main winner, although activity sidelined until the next two days Central Bank meetings and bond issues are concluded.
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