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Market eagerly awaits ECB decision

Market eagerly awaits ECB decision

The markets are eagerly awaiting ECB and BoE’s monetary policy decisions. The recent run of weak economic data has raised expectations that both central banks will be forced to take further action to stimulate growth. We expect an additional £50bn of quantitative easing in the UK, and the ECB to cut interest rates by 25 basis points to a new low of 0.75%.

Additional momentum for the BoE to take action came with the Services PMI release for June which fell to an eight month low. The index still indicates expansion at 51.3 but growth in the largest sector of the UK economy is faltering. This caps a poor run of PMI data with both manufacturing and construction reporting a decline in activity in the coming months.

Investors will also be watching a €3bn Spanish bond auction, including new 10-year bonds, which will gauge the market’s response to recent measures agreed by European leaders to ease the country’s funding problems.

Finally, there is also a feeling that the FED will look at further Quantitative Easing if there is a poor Non-Farms Payrolls figure tomorrow.

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