Focus turns to ECB and Bank of England lending rates
Having extended the deadline for the fiscal cliff the urgency to resolve the matter will cause less volatility between the dollar and its counterparts. Its impact will continue, however this will simmer to an underlying level as the negotiations return to discussion.
Returning to the first full working week since the New Year things will return to business as usual. This week the Bank of England and European Central Bank both meet to discuss their most pressing concerns, namely the respective economic recoveries.
With room for a cut in both Europe and the UK, interest rate levels will be deliberated and probably cause disagreement within the committees. Advocates for reduction now would feel that a lower cost of borrowing could spur a demand and aid recovery. If a cut isn’t a top priority now, looking further forward its likelihood may increase. Should a central bank decide to slash their rates by a quarter-point, the result would probably be a weakening of that currency as levels flow more freely around the economy.
A cut for the UK is perhaps less pressing than that of the euro zone. The UK’s Funding for Lending scheme looks as though it is loosening credit conditions for companies and personal borrowing; though the economy still appears stagnant, the time it takes for the effects to filter through the system mean a response is rarely instantaneous.
Today’s Key Announcements
- 08.00am – GBP – Halifax HPI m/m: increased to 1.3%
- 09.30am – EUR – Sentix Investor Confidence: expected at -13.7