ECB set to announce a possible 600bn 8211 1 2trn QE plan

Yesterday we saw some shocks from the data releases, notably causing moves in cable. The minutes were released with a surprise 9-0 vote to hold rates, with the two hawk members withdrawing their push for raising rates on the back of last week’s weak inflation data.

GBP/USD is currently trading below 1.5150, near to levels it fell from after the release and with the Public Net Sector Borrowing, the only data to be released today for the UK is expected to be 9.2bn compared to the last release of 13.4bn. One to watch for the GBP traders is the EUR/GBP upon its reaction to ECB meeting.

Today’s ECB meeting is perhaps one of the most anticipated to date, as we look for the announcement of quantitative easing (QE).  Yesterday rumours hit the wires about a possible €50 billion to be used per month to buy government bonds for a period of 1-2 years, which quickly sent the Euro falling. The expectation for the QE is now between €600 billion and €1.2 trillion, and it seems that the risk is likely to fall going by yesterday’s reaction. The shocks to happen that could counter this would be a figure larger than €1.2 trillion or no QE at all – but you can be sure the market will be extremely volatile.

If QE is announced, the importance will be the detail of how it will be put into place and who will be buying the bonds – whether it’s the ECB, or whether it will be tasked to the national centre banks.

Currently EUR/USD is trading below 1.1600 with the main event this afternoon, before this the minimum bid rate will be announced for the Eurozone – expected to be unchanged at 0.05%.

Another shock announcement from yesterday was the Bank of Canada announcing a rate cut of 0.25%, making the rate 0.75%. The surprise action took USD/CAD to 5-and-a-half year high, now above 1.2350.

Data from the US will be thrown in with the volatility of the ECB, as the unemployment claims are expected to fall to 301,000 from 316,000.

EUR/USD

Supports  1.1550 1.1480 1.1415   | Resistance  1.1810 1.1750 1.1680

USD/JPY

Supports  1.1720 1.1650 1.1590 | Resistance  1.1850 1.1910 1.1980

GBP/USD

Supports  1.5085 1.5030 1.4980 | Resistance  1.5190 1.5235 1.5290