ECB & BoE to announce rate decision
It’s that day of the month again when the European Central Bank and Bank of England both announce their rate decisions. Combined with tomorrow’s non-farm payroll data out of the US, this should be the most economically important 2 days of the month.
What can we expect?
For a short time, the economic markets will be moved by economic conditions and readings, as opposed to geopolitical events. The focus is not so much on the Bank of England today, as rates are expected to remain on hold with markets not expecting any movement until possibly November although this is becoming a bit less likely. Three months after Mario Draghi announced historic stimulus for the Eurozone, we should hear how that is going and if any new measures are to be introduced.
There are whispers of a further rate cut and the prospect of Quantitative Easing still appears on the horizon but not just yet. The most likely course of action is Draghi announcing further plans to purchase more asset based securities in order to add liquidity to the market and help revive lending. Indeed, last week the ECB appointed BlackRock to help design such a programme.
The Scottish Play
Yesterday saw Sterling struggle again despite stronger than expected PMI. Uncertainty over the Scottish referendum still causes concern. We also saw rumours of a ceasefire in the Ukraine which the markets seemed to approve of although these hopes were relatively tempered. The release of the Beige Book saw slight optimism in the US as the economy seems to be expanding at a “moderate pace”.
So, Bank of England and ECB rate decisions take centre stage along with the MPC statement and Draghi’s press conference. There are also lots of data out of the US with jobless claims, trade balance, PMI amongst the headliners.