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BoE and ECB Announce Policy Within the Hour; EUR/USD and GBP/USD Flat

BoE and ECB Announce Policy Within the Hour; EUR/USD and GBP/USD Flat

Christopher Vecchio, CFA, Senior Strategist


A quiet trading day is around the corner but not before what should be relatively placid price action interrupted by two quite important events: the Bank of England and the European Central Bank Rate Decisions. Thanks to the July 4 holiday in the United States, volatility in FX has been rather subdued overnight, at least in the European and North American currencies, so any disruption caused by the meetings over the next few hours is probably going to be short-lived.

On the BoE: it is new Governor Mark Carney’s first policy meeting but I wouldn’t be anticipating any new changes yet. While Governor Carney has issued a fair amount of dovish warnings in the run up to his ascension, the recent uptick in UK data (notably led by improving PMI surveys) handicaps any further accommodative aspirations at present time. One thing to watch for is if a policy statement is released – Governor Carney appears to be poised to break the habit of silence after a BoE policy meeting.

On the ECB: no new measures are expected and while negative rates will likely be discussed, they will not be implemented. It seems credit is already pricing in a hold, with bond yields across the continent ticking higher; and in context of a mostly unchanged EURUSD (-0.02% at the time this report was written), it’s clear that weakness in European sovereign debt is not reflecting risk aversion, rather positioning for the ECB meeting.

Taking a look at European credit, Portuguese concerns continue to be a negative influence, while the expected inaction from the ECB has also supported higher yields. The Italian 2-year note yield has increased to 1.867% (+6.4-bps) while the Spanish 2-year note yield has increased to 2.138% (+1.7-bps). Likewise, the Italian 10-year note yield has increased to 4.558% (+6.5-bps) while the Spanish 10-year note yield has increased to 4.760% (+1.2-bps); higher yields imply lower prices.


AUD: +0.54%

NZD: +0.30%

JPY: +0.20%





Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.14% (+0.60`%prior 5-days)


BoE_and_ECB_Announce_Policy_Within_the_Hour_EURUSD_and_GBPUSD_Flat_body_Picture_1.png, BoE and ECB Announce Policy Within the Hour; EUR/USD and GBP/USD Flat

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--- Written by Christopher Vecchio, Currency Analyst

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