Risk appetite is on a slightly stronger footing today as markets anticipate the first of the ECB’s long-term refinancing operations (LTROs) later in the session. The obviously beneficiary in the last 24 hours has been EURUSD which is now trading back above 1.3100 levels, and equities are also having a decent day; the Nikkei is +1.5% and Hang Seng +1.4% (although the Shanghai Composite is the notable underperformer trading down -1.1%).
Overnight, the BoJ had its final scheduled monetary policy meeting of 2011 and as expected, left interest rates at 0.10% while downgrading its outlook. Unsurprisingly, there was virtually no reaction in the currency space; the far more significant development will be if parliament passes Finance Minister Azumi’s recent proposal to increase FX intervention capacity.
Yesterday, the Riksbank cut interest rates by 25bp to 1.75%, in line with market expectations. Predictably, the statement raised concerns about low growth in the Euro area, and the subsequent dampening effect on the Swedish economy going forward. Forecasts for GDP were cut from 1.5% to 1.3% in 2012, and from 2.4% to 2.3% in 2013. Given that the rate cut was largely expected and that the statement was not as dovish as it could have been, the SEK currency actually strengthened in the aftermath of the release, falling to a low of 8.9505.
Coming up in today’s session, the key event will be the BoE minutes. At the meeting on 8 December, both rates (standing at 0.50%) and the asset purchase target (currently GBP275bn) were left unchanged and no statement was provided. This morning’s release will therefore be a first insight into whether any members dissented from the consensus view – most likely in favour of further easing. Other data due out today includes Norway’s AKU unemployment, Eurozone flash consumer confidence, and US existing home sales.
By
Overnight, the BoJ had its final scheduled monetary policy meeting of 2011 and as expected, left interest rates at 0.10% while downgrading its outlook. Unsurprisingly, there was virtually no reaction in the currency space; the far more significant development will be if parliament passes Finance Minister Azumi’s recent proposal to increase FX intervention capacity.
Yesterday, the Riksbank cut interest rates by 25bp to 1.75%, in line with market expectations. Predictably, the statement raised concerns about low growth in the Euro area, and the subsequent dampening effect on the Swedish economy going forward. Forecasts for GDP were cut from 1.5% to 1.3% in 2012, and from 2.4% to 2.3% in 2013. Given that the rate cut was largely expected and that the statement was not as dovish as it could have been, the SEK currency actually strengthened in the aftermath of the release, falling to a low of 8.9505.
Coming up in today’s session, the key event will be the BoE minutes. At the meeting on 8 December, both rates (standing at 0.50%) and the asset purchase target (currently GBP275bn) were left unchanged and no statement was provided. This morning’s release will therefore be a first insight into whether any members dissented from the consensus view – most likely in favour of further easing. Other data due out today includes Norway’s AKU unemployment, Eurozone flash consumer confidence, and US existing home sales.
By
M.Zohaib Gadit
Forex Trading Consultant
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