ECB and BOE rates
decisions due

Yesterday a minor correction halted the euro drive that we
have seen in the last week, whilst also slowing the dollar’s recent decline.

Disappointing retail sales and services data on the
continent gave investors a reminder that despite the positive developments,
such as Greece’s third bailout or Spain’s bank bailout, that Europe’s poor
economic performance is still hindering the area.

ECB and BOE rates
decisions due

Yesterday a minor correction halted the euro drive that we
have seen in the last week, whilst also slowing the dollar’s recent decline.

Disappointing retail sales and services data on the
continent gave investors a reminder that despite the positive developments,
such as Greece’s third bailout or Spain’s bank bailout, that Europe’s poor
economic performance is still hindering the area.

Attempting to curb the problems, the ECB will meet today to
discuss the best use of monetary policy tools to pump life back into the euro
zone. It is widely believed that the ECB will refrain from any further interest
rate cuts, with the belief that their pledge to buy government bonds has
already lowered borrowing rates enough.

Similarly in the UK, as fears mount that the economy will
struggle to advance, the Monetary Policy Committee will also meet to discuss
the possibility of rate cuts and increasing the asset purchasing facility. Last
month the MPC finished its latest round of £50bn round of quantitative easing,
and whilst Mervyn King has insisted the Bank of England has not lost faith in
QE, it has not advocated any new purchases for this month.

With little news from the fiscal cliff and negative economic
data from Europe, the adjustment of yesterday may hold, though as gradual
progress is made in the US negotiations we are likely to see a return to the optimistic
outlook for the short term, which has seen the dollar weaken to the advantage
of the euro.

 

Key Announcements
Today:

• 08.00am – GBP – Halifax HPI m/m: returned unexpectedly
  higher at 1.0%
• 09.30am – GBP – Trade Balance: expected at -8.7bn
• 11.00am – EUR – German Factory Orders m/m: expected to show
  vast improvement at 0.9%
• 12.00pm – GBP – Asset Purchase Facility: to remain at 375bn
• Tentative – GBP – MPC Rate Statement: expected to remain at
  0.5%
• 12.45pm – EUR – Minimum Bid Rate: expected to remain at
  0.75%
• 13.30pm – EUR – ECB Press Conference
• 13.30pm – USD – Unemployment Claims: expected down at 373k