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Forex pairs in this Article » EUR/USD (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the key event today for Europe will of course be the ECB rate decision at 1245 and the press conference at 1330.

Key Quotes

“We do also have a BOE decision at 1200 but it is only with the ECB that we might get a change in policy stance. Our call is that today will not be the day and that the ECB is much more inclined to wait until the staff forecasts update next month and also will not want to be seen as responding to just one piece of data – the shock decline in the annual inflation rate from 1.1% to 0.7% in October.”

“As mentioned here before, the November 2012 m/m change in inflation was -0.2%, meaning the base effect is more favourable for a rebound in the annual rate in November. But that should not take away from the fact that disinflation is very evident and the staff forecasts next month will likely be lowered, offering the ECB the platform for a cut in the refinancing rate.”

“For today, the key issue will be whether the ECB formally acknowledges these downside risks by altering the inflation risk assessment from “balanced” to the “downside”. Anything less than this formal change in stance would likely result in EUR/USD squeezing higher with many positioned for either a cut or an aggressive signal of a rate cut to come in December.”
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