Archived IMT (2011.04.07)

Portugal's final acceptance of its fate was in no doubt prompted by the inevitability of today's rate hike by the ECB, allied to the high borrowing costs associated with yesterdays short term t-bill auction.

Before the ECB, we have the BANK OF ENGLAND, which is likely to hold rates given the UNLIKELY SCENARIO of getting two extra votes in the hawk camp and the uncertainty with respect to recent economic data. SEE PREV IMT (by AB) for more detailed analysis on the balance of votes within BoEs Monetary Policy Committee. The Bank will probably wait until they have sight of Q1 GDP data later this month, even though inflation data next week is likely to exert further pressure on them to raise interest rates to prevent consumer expectations of it becoming embedded.

THE ECB is likely to have no such qualms, despite an inflation rate half of the UKs and are expected to hike rates by 0.25%. This is pretty much discounted as a given so it would be a major surprise if they were to hold. In the event markets get what they expect the post meeting press conference will be critical in how Trichet justifies any rate hike, and whether or not it is the first of many. US WEEKLYCLAIMS expected to come in around 385k. EURUSD broke 1.4280 trend line resistance from the 1.6040 highs in 2008 and the upside risk is now is test the 2010 highs at 1.4580. EURGBP still eyeing 0.8800, but unlikely to make it above 0.8850. Downside seen stabilizing around 0.8680. GBPUSD continues to find sellers above 1.6350 and good buying interest around 1.6180.

By KM -AshrafLaidi.com Staff