http://www.actionforex.com/analysis/...0120204158874/
Snippet:
Central banks' decisions on tap
Next week sees interest rate and policy decisions from the RBA, BOE and ECB. The RBA is first up on Tuesday afternoon local-Sydney time and markets are expecting a 25 bp rate cut from 4.25% to 4.00%. There is some minor risk of a larger 50 bp cut, as the RBA does not expect banks to pass on to customers the full 25 bps if it only cuts by that much. There is also a small risk that the RBA stays on hold, potentially in light of recently more upbeat global data and calming in the Eurozone debt crisis. Regardless, AUD is not trading on interest rate dynamics at the moment, so we would look to the overall risk environment to gauge AUD's outlook.
The BOE is first up on Thursday morning and they are expected to hold the benchmark rate steady at 0.50%, but also to initiate a third round of asset purchases. Markets are mostly expecting a smaller round of GBP 50 bio, with a minority expecting another round of GBP 75 bio. In light of some surprising strength in recent UK data, we think the risk is that the BOE does nothing at this meeting, which could see GBP strengthen briefly.
Sterling also appears to be defying QE speculation in recent days and GBP/USD is nearer to its recent highs. However, we would note cable is having difficulty extending gains beyond 1.5900, and we are watching for a daily close below the 1.5765 daily cloud top to suggest a potential failure and the start of a reversal lower.
The ECB is also up on Thursday, but are expected to keep policy on hold. ECB Pres. Draghi is likely to point to slightly better PMI's as a further sign that 4Q was potentially the nadir for the Eurozone, but will also certainly note that downside risks remain. Overall, we don't think the ECB meeting/press briefing will drive EUR, but that the Greek outcome and risk sentiment will be more important.
Snippet:
Central banks' decisions on tap
Next week sees interest rate and policy decisions from the RBA, BOE and ECB. The RBA is first up on Tuesday afternoon local-Sydney time and markets are expecting a 25 bp rate cut from 4.25% to 4.00%. There is some minor risk of a larger 50 bp cut, as the RBA does not expect banks to pass on to customers the full 25 bps if it only cuts by that much. There is also a small risk that the RBA stays on hold, potentially in light of recently more upbeat global data and calming in the Eurozone debt crisis. Regardless, AUD is not trading on interest rate dynamics at the moment, so we would look to the overall risk environment to gauge AUD's outlook.
The BOE is first up on Thursday morning and they are expected to hold the benchmark rate steady at 0.50%, but also to initiate a third round of asset purchases. Markets are mostly expecting a smaller round of GBP 50 bio, with a minority expecting another round of GBP 75 bio. In light of some surprising strength in recent UK data, we think the risk is that the BOE does nothing at this meeting, which could see GBP strengthen briefly.
Sterling also appears to be defying QE speculation in recent days and GBP/USD is nearer to its recent highs. However, we would note cable is having difficulty extending gains beyond 1.5900, and we are watching for a daily close below the 1.5765 daily cloud top to suggest a potential failure and the start of a reversal lower.
The ECB is also up on Thursday, but are expected to keep policy on hold. ECB Pres. Draghi is likely to point to slightly better PMI's as a further sign that 4Q was potentially the nadir for the Eurozone, but will also certainly note that downside risks remain. Overall, we don't think the ECB meeting/press briefing will drive EUR, but that the Greek outcome and risk sentiment will be more important.