Credit Suisse on what to expect from the ECB and BOE

Author: Adam Button | Category: Central Banks

The ECB and BOE meetings are Thursday

The European Central Bank and Bank of England are on tap Thursday and while no meaningful changes are expected in benchmark rates, signals from both central banks could move the euro and pound.

We already know that ECB growth forecasts will be trimmed and that the euro has fallen at every ECB press conference this year.

Economists at Credit Suisse expect the consensus with the ECB confirming a taper from October to December and a possibility Draghi could highlight Brexit and tariff risks.

"A possible wild card would be if Draghi used these risks to express the idea that a rate hike could easily come much later than summer 2019 in principle, a development that would quickly cap core euro area yields and open up more room for US - euro area rate differential widening," they write.

If so, they anticipate a fall in the euro to a range of 1.13-1.15..

Alternatively, an optimistic and confident tone from Draghi could send the euro to 1.18.

As for the Bank of England, they see a 9-0 BOE vote for no change as entirely reasonable and that cable risks continue to be all about short covering. They say the latest climb in the pound is simply short covering rather "than any genuine conviction that the worst is over from the Brexit saga."

Looking ahead, they see risks at the Salzburg meeting on Sept 19-20 which could be compounded by internal divisions at Labour and Conservative party conferences later in the month.

"We remain committed to the idea that a sharp GBP reversal lower is likely in coming weeks," they write.

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