Intraday Market Thoughts

BoE Adds 50 bln In QE; Draghi Conference Next

by Patrik Urban
Feb 9, 2012 12:58

Greek deal could be concluded today in Brussels; BOE keeps rates steady and adds GBP 50 bln in QE; UK manufacturing production rose and trade deficit narrowed. Market focuses on ECB decision and later to Draghi's press conference. We have a new set of Premium trades, including 2 on EURGBP. The first EURUSD long hit all targets.

USD trades within a narrow range against most other majors. GBPUSD rose after only GBP 50 bln in QE was announced. European equities are about 0.3% higher

It seems that the Greek saga is finally coming to its last phase. Greek finance minister Venizelos is in Brussels today at the European finance ministers meeting to discuss one remaining issue which is the size of the pension cuts. Initial reports suggested that the deal is to be signed later in the evening, however, a German official has already said that he does not see any decisions being made today.

Meanwhile, Greek privatization target was increased to EUR 65 bln through 2017 and November unemployment rate jumped to 20.9% from 18.2%.

The MPC kept rates steady at 0.5% and announced a GBP 50 bln increase of the Asset Purchase Facility. Despite the smaller than expected amount, gilts fell and GBP rose due to the fact that markets were expecting the possibility for a surprise just before the announcement, hence the smaller outcome ended up favourable for GBP across the board.

In other news, UK manufacturing production rose 1% in December from previous -0.1% (0.8% from -1% y/y). Annual industrial production improved to -3.3% from previous -3.6% and finally trade deficit has narrowed to GBP -7.1 bln from GBP -8.9 bln.

The ECB left rates unchanged at 1.0%, denying some market observers the surprise of a 25-bp cut.

The key event of today's New York session is ECB press conference that starts at 8:30 am ET. The market will wait for details of how exactly will the ECB be involved in the Greek deal and whether it will take a loss on its Greek debt holding. Jobless claims that are due at the same time are seen only marginally higher at 369K from 367K.

At 10:00 am ET wholesale inventories are due and are seen higher in December at 0.5% from 0.1%. NIESR will release its estimate of the UK GDP which is likely to lead to GBP volatility.

Our first Premium EURUSD long hit all targets, while the 2nd one is 15 pips away from all targets. Full details can be seen here: We have a new set of Premium trades, including 2 on EURGBP. For direct access, click here:


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