Talking Points:

BOE Policy Announcement Likely to be a Non-Event for the British Pound
Euro May Fall if Draghi Confirms 1Q Timeline for Sovereign QE Decision
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Monetary policy announcements from the Bank of England and the European Central Bank are in focus. In the UK, economic news-flow has cautiously improved over recent weeks, meaning a dovish shift on the MPC committee is unlikely. On the other hand, the outlook is not so robust as to expect the hawks to build a voting majority. The BOE does not typically publish a statement when policy is left unchanged, so today’s announcement will probably amount to a non-event for the British Pound.

The ECB rate decision may prove more eventful. The central bank still in the process of implementing a medley of stimulus measures and will probably want at least a few months to assess performance after the entire scheme is operational. That means a change in policy doesn’t look to be in the cards for now, putting the spotlight on the press conference to be held by ECB President Mario Draghi following the sit-down.

Thus far, the markets have been less than impressed with the ECB’s easing effort. Indeed, the central bank’s balance sheet has been broadly flat for two months even as it launched covered bond purchases. That is likely to provoke questions about policymakers’ readiness to launch “sovereign QE”: the purchase of government bonds with newly-created liquidity.

Recent commentary from ECB officials has suggested that they intend to wait through the first quarter of next year to establish if a sovereign QE effort is appropriate. Confirmation of broad-based agreement on such a timeline from Mr Draghi would amount to a significant dovish development and may weigh on the Euro. We remain short EURUSD.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

23:00

NZD

QV House Prices (YoY) (NOV)

5.1%

–

5.9%

0:30

AUD

Trade Balance (A$) (OCT)

-1323M

-1800M

-2261M

0:30

AUD

Retail Sales s.a. (MoM) (OCT)

0.4%

0.1%

1.2%

European Session

GMT

CCY

EVENT

EXP

IMPACT