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Markets focused on ECB and BoE meetings

Markets focused on ECB and BoE meetings

Yesterday saw the main FX pairs confined to fairly narrow ranges during European market hours as traders kept their pencils sharpened ahead of the conclusion of the Fed policy meeting in the US. As expected, the pace of QE tapering doubled to $30bn, but the key information was regarding rate hikes. The median projection is for three rate hikes next year, with three more in 2023 – the dollar strengthened in the initial aftermath of the announcement, with EUR/USD falling to as low as $1.12. However, these gains were quickly reversed after the press conference. 

As we get underway this morning, EUR/USD opened at the $1.13 mark, GBP/USD is changing hands in the top half of the $1.32-1.33 band and EUR/GBP continues to operate in the lower half of the 85-86p area. 

As we look ahead to today, it is the turn of the BoE and the ECB to draw the attention of traders as they hold their final monetary policy meetings of the year. With the emergence of the omicron variant, the BoE is expected to leave policy unchanged. If policy is left unaltered, traders will look to the meeting statement and minutes for guidance as to when the BoE may hike rates. The ECB, also set to leave policy unchanged, may provide some guidance as to the future of its QE programmes as well as upward revisions for inflation. Datawise, the flash PMIs for the US, UK and Eurozone are due, but expect the central bank meetings to hold the crowd today.

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