Intraday Market Thoughts

Sterling Fears Upcoming Bank of England Minutes

by Kyle Morrison
Jun 22, 2011 6:38

Bank of England minutes expect to show a more dovish tone, after Fisher comments, Greece survives no confidence vote, with austerity vote next, FOMC meeting due

The monetary policy committee of the Bank of England is expected to have a slightly more dovish outlook this month after the departure of Andrew Sentance in May, with the vote count changing to a 7-2 split for holding rates. The remaining two hawks are expected to be Spencer Dale, the Banks Chief Economist and Martin Weale who appears to have picked up the mantle that Mr Sentance put down. New member Ben Broadbent is not expected to make too many waves at his first meeting, and given Paul Fishers comments yesterday about the likelihood of further QE there is the possibility of a slightly more dovish outlook.

The pound has already slipped back in the last 24 hours and could face further weakness in the event of a dovish statement.

Last nights Greece confidence vote was a classic case of buy the rumour, sell the fact as the euro spiked higher to 1.4435 and then slipped back to 1.4360 in about two minutes. The margin was 155/129 in favour of the government, however it needs to be remembered that this vote is one obstacle amongst many as the markets look ahead to next week's austerity budget vote on the 28th June. Given the scenes outside the Greek parliament after last nights vote, one shouldnt assume that a passing of the bill will be a given.

The single currency also gained some support from a Chinese statement that they remained willing to help boost economic growth in Europe.

A statement by ratings agency Fitch that stated that any type of debt restructuring, voluntary or not, would be treated as a credit event, was shrugged off by the single currency as it continued its squeeze higher.

In economic data out for April, Euro zone industrial orders are expected to recover from their 1.5% March decline, to rise by 1% month on month.

Later today we have the latest FOMC meeting where we will get the latest growth forecasts for the US economy, and Bernankes thoughts on a post QE2 world.


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