Thursday 7th August 2008
First up is the Bank of England at 12 noon. How will the nine policy makers call it this month? Last month there was a split decision with one voter calling for a rate cut, one for a rate rise and seven to keep it steady. The market is expecting the base rate to remain on hold today at 5.00%. However, a rate cut bias is gathering momentum amongst traders. According to the overnight index swaps the smart money is on a 0.50% cut within the next year. Cash placed for 3 months and out is looking very attractive.
Subsequently the Bank of England hands the baton over to the European Central Bank. At 12.45pm today the decision of a rate hold is expected to be released into the market; leaving the base interest rate at 4.25%. The ECB President Trichet is fully aware that the Eurozone’s economy is showing signs of stagnation if not deterioration but with inflation remaining rife a rate cut appears to be off the cards.
USD bulls continue to run rampant after the FOMC’s policy statement failed to quell speculation of a number of rate hikes over the next 12 months. The USD made significant strides across all the majors yesterday. Few would bet against this trend continuing especially with the recent easing of oil prices.
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