Will Rate Decisions Rattle Markets?

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Will Rate Decisions Rattle Markets?

Justin Burkhardt | FXFocus.com
 

A zero sum game. That's where the central planning has taken us. Rate decisions tomorrow at the BOE and ECB could rattle the markets as traders look for direction in a directionless world.

Speculation is heightening over tomorrow’s ECB rate decision after newly released data reveals that the Euro-zone contracted in the fourth quarter of 2012 confirming that the region is officially in a recession.

There two pools of investors with opposing expectations on the outcome of tomorrow’s policy meeting. The first pool believes that today’s data is justification enough to hold interest rates steady while the second pool rationalizes a quarter of a percent rate cut (from 0.75% to 0.50%) to prop up the EU’s dwindling economic state.

With the EU’s economic data in the pits as of late, the ECB will be forced to consider a rate cut of at least a quarter of a basis point sometime in 2013… but this will more than likely not occur in tomorrow’s policy meeting. The two opposing views on the anticipated outcome of the ECB’s rate decision will inevitably create some form of market friction…. Expect then unexpected.

Meanwhile the majority of economists polled believe that the BOE’s interest rates will remain unchanged…

Indicators on Watch

  • EUR European Central Bank Rate Decision
  • GBP Bank of England Rate Decision
  • EUR BOE Asset Purchase Target

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Your currency analyst,

Justin Burkhardt