Is today the start of QE?
Good morning. The financial markets are certainly an interesting place at the moment. Last year seemed to be characterised by a lot of talking around subjects and a bit of a status quo regarding various issues, whereas 2015 has started with a bang and decision makers actually making decisions as opposed to letting the market speculate.
Yesterday saw interesting news out of the UK as unemployment dropped more than expected, average earnings increased but wage growth dropped. As hinted in yesterday’s report, BoE policy makers MacCafferty and Weale decided not to vote in favour of a rate hike for the first time since August. This left the vote 9-0 in favour of keeping rates on hold. Inflation and issues within the Eurozone are making people more cautious and now commentators are expecting no rate hike until 2017. If this turns out to be the case then we will see 9 years at 0.5%.
The Bank of Canada surprisingly cut interest rates last night by 25bp to 0.75%. This was another move that took the market by surprise and was the first such move since 2010. This decision was made due to falling oil prices putting pressure on the Canadian economy.
Today, all eyes will be on Mario Draghi and his announcement regarding Quantitative Easing. Yesterday, we saw huge volatility on the Euro when rumours swept the market that Draghi would announce the introduction of QE at a rate of €50bn per month but that this would not start until March. I have seen predictions of anywhere between €550bn – €1trn and the focus is going to be on how quickly they will invest and what they are going to invest in. If Draghi disappoints, this could spell bad news for the Eurozone as it has been mooted for so long that he has to get this right.
It’s certainly going to be another interesting day, filled with volatility and for those of you looking to buy or sell, speak to your Currency UK account manager and put orders in the market as it will be choppy!
Other than the ECB rate decision and press conference at lunchtime, we also have jobless claims from the US and consumer confidence from the Eurozone.