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Daily Currency Report - 9th/1st Focus on BoE & ECB Interest rate & Policy decisions.

Daily Currency Report - 9th/1st Focus on BoE & ECB Interest rate & Policy decisions.

 
Old Jan 9th 2014, 11:03 am
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Default Daily Currency Report - 9th/1st Focus on BoE & ECB Interest rate & Policy decisions.

UK News & Data releases

The main focus today will be on the UK MPC meeting, with many now expecting some sort of statement relating to the unemployment threshold after comments in the press speculating on the potential for the threshold to be lowered. In practice, some top analysts including myself doubt that the MPC will change anything until or unless the threshold is reached, and possibly not even then.

Consequently many expect no change in policy and no statement from the MPC today, which may be seen as positive for GBP given the speculation of a reduction in the threshold. The MPC will probably dominate today and suggests upside scope for GBP/USD towards 1.65, while GBP / EUR has scope towards 1.2195 following the break of last year's high at 1.2118.

Euro Zone & Swiss Franc News & Data releases

Today's ECB press conference will be the main focus today. In common with other forecasters, we don't expect any substantive changes to ECB policy this month, with the data over the last month having come in broadly in line with expectations. However, there will be interest in any information from Draghi on how the ECB is planning to manage liquidity with the maturity of LTROs dropping below one year in the next couple of months.

He hinted last time at some sort of conditional liquidity provision similar to the UK FLS, but more detail is awaited. Any indication that new liquidity will be provided may prove slightly short term EUR negative by pushing term EUR rates lower but if his comments suggest no new liquidity measures, any short term EUR gains that result from higher EUR yields seem unlikely to be sustained, as credit concerns seem likely to emerge.

US Dollar News and Data Releases

In spite of the stronger than expected ADP number yesterday, the USD failed to extend the modest gains it had made after the trade data on Tuesday, despite an initial knee jerk push higher after the numbers.

Following stronger than expected ISM employment figures, the ADP numbers provide another reason to expect a relatively strong employment report tomorrow, but the muted USD reaction to the ADP data suggests that it will be hard for the USD to make a major advance even on modestly stronger than expected numbers. For today, the focus will be more on events in Europe, but the failure to make ground yesterday suggests risks may be on the USD downside in the short run.

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