Markets choppy ahead of ECB meeting tomorrow

Wednesday, January 21, 2015

A choppy trading session today with mixed results across European benchmark indices as jittery investors rushed to position themselves ahead of tomorrow’s all important ECB meeting. The majority of indices shed recent gains as markets consolidated ahead of the expectation that tomorrow the ECB would announce a sovereign bond purchase programme that many hope will boost the euro.

Having dropped back to levels last seen in 2003 late last week, trading towards 1.1460 on Friday, market participants are hopeful that the central bank’s commitment to shoring up the single currency by buying as much as €50bn per month in sovereign debt until the end of 2016 will see the euro recover some of the steep losses that have dominated trading activity against the dollar in recent months. The euro, which was trading around 1.2500 five weeks ago lost over 8% against the dollar up until Friday last week but encouraging activity throughout today’s trading session has seen the single currency strengthen towards 1.1680 before settling around 1.1630 on the anticipation of further stimulus.

As expected, the Bank of England left rates unchanged this month at 0.5% as ongoing concerns regarding the inflation outlook and a cautious global growth outlook saw the MPC vote unanimously to keep rates the same. The move, which saw the first 9-0 vote since July last year, saw two of the committees most vocal proponents for higher rates, Martin Weale and Ian McCafferty, agree with the other seven members, with details emerging from the meeting suggesting that policymakers were in agreement that any immediate rate rise may cause an entrenchment of below target inflation. UK ten year gilt yields dropped sharply on the decision after intraday moves saw yields rally to 1.563% before falling to a low of 1.464% as investors rushed to safety.

 EUR strengthens against USD ahead of ECB meeting

EUR Curncy Euro Spot Daily 21 2015 01 21 14 03 27

BoE move sees 10 year gilt yields drop

GUKG10 Index UK Generic Govt 10 2015 01 21 14 03 58

Topics: ECB, BoE, EUR, Yields
More from: Kash Kamal