Euro Cross Pick 10.02.2012
As the European Central Bank and the Bank of England are scheduled to meet on Thursday, we will be keeping a close eye on the EURGBP, and the pair may give back the advance from earlier this week should the Governing Council continue to strike a dovish tone for monetary policy. As the euro-area faces a deepening recession, central bank President Mario Draghi may sound increasingly cautious this time around, and the ECB may now look to target the benchmark interest rate in an effort to stem the downside risks surrounding the region. In contrast, the BoE may once again refrain from releasing a policy statement as the Monetary Policy Committee is widely expected to preserve its current policy in October, and we may see Governor Mervyn King soften his dovish tone as central bank officials scale back their forecast for undershooting the 2% target for inflation. Indeed, the deviation in the policy outlook continues to favor a bearish outlook for the EURGBP, and we will look for an opportunity to sell the pair as the ECB continues to embark on its easing cycle.
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