Bank Research Consensus Weekly 10.04.11
QE2 Likely to Set Sail, but it’s No Panacea
Jonathan Ashworth, Morgan Stanley
At Least a 50-50 Chance QE Resumes in November. The vote on quantitative easing (QE) at the September meeting remained 8-1, but the tone of the minutes signaled an increased likelihood that the Bank of England (BoE) will resume asset purchases over the coming months. According to the minutes, "For most members, the decision of whether to embark on further monetary easing at this meeting was finely balanced since the weakness and stresses of the past month had significantly strengthened the case for an immediate resumption of asset purchases". Moreover, "Most of these members (read: apart from Adam Posen) thought that it was increasingly probable that further asset purchases to loosen monetary conditions would become warranted at some point."
ECB Meeting in Focus
Arne Lohmann Rasmussen, Chief Analyst, Danske Bank
This week’s main event in the FX market will be the ECB meeting on Thursday. We do not expect a rate cut as many observers are suggesting (see market movers). However, we do expect to see a reintroduction of the 12-month long-term refinancing operation (LTRO) and possibly also a reintroduction of the covered bond programme that ran from mid-2009 to mid-2010.
More QE from the BoE?
John E. Silvia, Chief Economist, Wells Fargo
The Bank of England (BoE) holds its normal monthly policy meeting on Thursday and it is universally expected that the BoE will keep its policy rate unchanged at 0.50 percent, where it has been maintained since March 2009. However, weak economic activity—real GDP has been more or less flat since Q3 2010—makes it likely that the BoE will ease further at some point.
Canada – Positive News Fails To Quell Fears Of A Recession
Shahrzad Mobasher Fard, Economist,TD Bank Financial Group
The Canadian dollar continued to get caught up in the cross-fire this week, as jittery global investors continued to flee commodity-oriented markets in droves. After rising to US$0.985 on Tuesday, the currency plunged 3 US cents over the remainder of the week – to a one month low of US$0.955. In the past two weeks alone, the Canadian dollar has lost about 7% against the U.S. greenback.
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Compiled by David Song, Currency Analyst
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