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.

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

1. 08.00am – GBP – Halifax HPI m/m: increased to 1.3%
2. 09.30am – EUR – Sentix Investor Confidence: expected at
   -13.7