Archived IMT (2009.08.11)

PRE-BOE INFLATION REPORT & FOMC DECISION INSIGHTS. The FOMC is expected to remind markets that it has yet to complete its current asset purchase program, i.e. NO NEW batch of treasury purchases, which could be neutral-to-positive for the US dollar, and positive for the yen in the event that equities react negatively to the statement (no new purchases means no expanded QE, which tends to be more negative for risk appetite). This would be the OPPOSITE of last weeks Bank of England announcement, which surprised markets by expanding QE, boosting equities, HURTING STERLING and dragging down guilt yields. Tomorrows Bank of England quarterly inflation report (9:30 am GMT, 10:30 am BST) could add more GBP selling as it makes the economic case for the decision to expand QE, i.e, fragile GDP outlook, sub-target inflation and so on. While last Thursday was the BoE surprise, tomorrow could be the rationalization of that surprise in the form of a very detailed inflation report. We expect last week's gravestone doji in cable to unleash more losses for this week and broadening GBP losses. CAD losses are not finished yet either.