Talking Points:

BOE Policy Announcement Likely to be a Non-Event for the British Pound
Euro May Fall if ECB President Draghi Hints at Readiness to Launch QE
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Monetary policy announcements from the Bank of England and the European Central Bank headline the economic calendar in European hours. The former is likely to be another non-event. An MPC committee split between a status-quo majority and a hawkish minority meeting against a backdrop of deteriorating UK economic news-flow all but assures standstill. That is likely to translate into a muted response from the British Pound.

On one hand, matters are not so bad as to allow for dovish unanimity and thereby possible stimulus expansion. On the other, the economy is not so robust as to make it likely for the hawks to build a voting majority. The BOE typically does not publish a statement when no policy changes occur, so nuances about the committee’s leanings in the months ahead will have to wait until minutes from the sit-down are released in the weeks ahead. All told, traders will probably learn next to nothing that will alter their policy bets today.

The ECB rate decision may prove more eventful. With the central bank still in the process of implementing its medley of stimulus measures and probably wanting a few months to assess performance after the entire scheme is operational, a change in policy is unlikely at least until several months into 2015. That puts 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. That may invariably provoke questioning about policymakers’ willingness to do more if need be, introducing a conversation about “classic” QE (the purchase of sovereign bonds with newly-created liquidity). Thus far, the ECB has sidestepped the issue considering the distaste of some key Eurozone member states (notably Germany) for such measures.

The landscape may change if the existing easing effort falls short however, and the markets will be curious to hear if Mr Draghi is prepared to go down the QE path if need be. With that in mind, strong rhetoric suggesting as much from the ECB President may weigh on the Euro. Needless to say, its absence may offer the single currency a lift. We remain short EURUSD and EURGBP.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

23:50

JPY

Bank of Japan Oct. 6-7 Meeting Minutes

–

0:30

AUD

Employment Change (OCT)

24.1K

20.0K

-23.7K

0:30

AUD

Unemployment Rate (OCT)

6.2%