BoE Remains on Hold, No Statement Leaves Markets Guessing

Fundamental Headlines

• Inflation Hawks Should Stand Down– Wall Street Journal
• Beige Book: Economy Improving – Wall Street Journal
• Greece lines up sale of 10-year bonds- Financial Times
• Emerging-Market Stocks Snap Four-Day Rally as Greek Bonds Decline on Sale– Bloomberg
• AIG `Still Exposed' After Rescue as Mortgage Insurer, Lender Cause Losses- Bloomberg

EUR/USD – The European Central Bank left their benchmark interest rate unchanged at 1.00% as expected. Policy makers have been firm in their assessment that interest rates are appropriate as risk remain balanced. The final reading of fourth quarter GDP confirmed the economy grew at a pace of 0.1% validating fears that downside risks remain. Financial services, agriculture and industrial production were all flat for the period. Ending stimulus programs are expected to weigh further on output unless consumers begin to open their wallets, which are considered unlikely as sentiment reading have been going in the wrong direction. To discuss this and other topics, please visit the EUR/USD forum.

GBP/USD – The Bank of England remained on hold for a consecutive month as they left their benchmark interest rate at 0.50% and refrained from adding to their asset purchase program. Fears had grown that additional quantitative easing was forthcoming following comments from Governor King at the beginning of the month. The central bank leader stated that it was premature to end their stimulus efforts and that more measure may be needed. The lack of a statement following the announcement will leave markets guessing until the release of the meeting minutes next week. To discuss this and other topics, please visit the GBP/USD forum.