Once again the levels on the majors this morning bear an uncanny resemblance to those seen at the North American close Wednesday, EUR/USD at 1.4405 effectively unchanged, while GBP/USD is off maybe 10 points at 1.6990.
The market is effectively on hold, consolidating ahead of the BOE, ECB rate decisions later today and the US jobs data tomorrow.
EUR/USD looks well ensconsed within a relatively narrow range, with 1.4350/1.4450 the well- defined parameters.
It’s a given the Bank of England and European Central Bank will hold rates steady at 0.5% and 1.0% respectively.
The main interest is what the Old Lady will do regarding quantitative easing. Will the bank extend the present programme a further £25 bln to the allocated ceiling of £150 bln? While there is no strong consensus as to the likely outcome, a run of decent economic data has swayed the market slightly into believing the bank will hold steady.
Personally I still believe the UK economy is extremely fragile. I most certainly don’t see signs of robust recovery. I think the bank should extend the QE programme and if you held a gun to my head I’d say they might just go ahead and do the additional £25 bln. Close call though.
If they do, then cable would likely come under some decent selling pressure. On the reverse, no additional QE and cable should make further ground. I think the bigger reaction though would be to additional QE.
