As the Fed keeps its powder dry, the big question on everyone’s lips is will Super Mario deliver or will he kick that can further down the road? The fact that his reputation is on the line means he has to act and do something of consequence, but what? Rumours of rate cuts, LTRO or a return to bond buying through the SMP have all been suggested. The most likely outcome of which appears to be the latter but this is hardly going to boost a market lacking confidence and could be perceived as another sticking plaster? Draghi still appears to be struggling to get the Germans onside (not surprising with elections around the corner) and so the pessimists out there have reacted accordingly and price action suggests we could see a squeeze lower before the statement. Could they cut rates?
Range: 1.5522 – 1.5558
The manufacturing PMI data released yesterday fell to its lowest level since May 2009, with the largest drop seen in the exports orders data. The BoE is expected today to leave rates unchanged at 0.5%. Mervyn King will use new economic forecasting to assess last month’s additional £50 billion QE effects on the UK economy. Cable has crumbled, with dollar strength across the board after the FOMC disappointed the market with no shift in ‘exceptionally low’ rate guidance from 2014 to 2015 as most had expected.
There seems to be no stopping the lifestyle currency despite the US dollar’s strength after the Fed disappointed the easy money addicts. Despite the global growth concerns the domestic economy in Australia is performing well with another positive data reading this time in the form of retail sales which rose 1% against the median forecast of +0.7%, with upwards revision to the previous month’s number. AUD rallied 50 points on the release but today’s fortunes will likely be all about the ECB and the risk trade.