ECB meeting takes centre stage

Today the main focus will be on the European Central Bank
meeting.  The pressure has increased on the ECB to do more
following renewed uncertainty from the US concerning the timing for
tapering their asset purchase programme.  In addition, the
recent low CPI inflation number raises the expectation that the ECB
will need to be dovish today to counter deflation.  We are
probably not going to see a rate cut today although that is a
possibility, with the likelihood that they will signal a rate cut
moving forward or easing through another form in the near
term.  In the run up to today’s meeting, the euro has fallen
across the FX markets and especially against the USD on the
expectation of something definitive from the ECB.  If the ECB
disappoints and does not lean towards a dovish stance then we could
see a bounce back into euro strength.

We also have the interest rate decision from the Bank of England
today with no change or surprises expected.  Focus will
instead fall on the inflation report next week to gauge the
thoughts of the Bank of England – especially in the light of such a
strong run of positive data.  Later on, we have US initial
jobless claims and preliminary US third quarter GDP which will be
closely eyed for the pace of growth with the consensus for 2 per
cent growth against 2.5 per cent in Q2.

Elsewhere, the Aussie dollar fell due to a weaker than expected
jobs report which supports a dovish sentiment for the Reserve Bank
of Australia indicating further rate cuts to come from their
current level of 2.5 per cent.