Central banks due to ease monetary policies

With the holiday in America yesterday keeping the markets quiet, we are immediately back into the action today with the Bank of England and ECB meetings at lunchtime. Central banks due to ease monetary policiesThe BoE is expected to announce another £75 billion of Quantitative Easing (QE).

Last month’s vote finished 5-4 in favour of waiting and there has not been any improvement in the general outlook for the UK economy, it is therefore very likely that the bank will extend the QE program today and Sterling is already reflecting that possibility.

The ECB is expected to drop its benchmark interest rate below one per cent for the first time, and reduce its deposit rate to zero.

The reduction in the deposit rate is supposed to push banks into lending rather than parking cash as the ECB, but there is lack of demand for credit by businesses and consumers as the great deleveraging continues and it will constrain Eurozone banks ability to increases their lending.

The main currencies pairs are very quiet in early trading this morning and will continue to be so as we build towards the central bank decisions at lunch time.  Other data of note today includes German factory orders and the US ISM-non manufacturing survey out this afternoon.

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