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The Bank of England (BoE), central bank of Turkey (TCMB) and ECB delivered broadly as expected yesterday, according to analysts at Danske Bank.

Key Quotes

“First, the BoE announcement was a dull affair, with no new forecasts or policy signals. We still expect the BoE to hike around once a year and our base case is that the next hike will arrive in May 2019, after the UK formally leaves the EU.”

“Then more action was seen in Turkey: while Turkey’s president Recep Erdogan was out rattling TRY markets ahead of the TCMB decision, the central bank managed to surprise markets by delivering a significant rate hike of 625bp for its one-week repo rate, sending it to 24.00%. The accompanying statement further stroked a hawkish tone promising more monetary tightening ‘if needed’.”

“The decision fuelled a risk-on move across emerging market currencies and sent the TRY up more than 4% up against the USD from yesterday’s open levels.”

“Finally, the ECB did not deliver new policy signals in a meeting that on the face of it was rather uneventful. However, Mario Draghi notably highlighted risks ‘gaining more prominence’ – albeit still seen as balanced for growth – and importantly the ECB’s confidence in the inflation outlook prevailed.”

“Rates markets were trading broadly sideways through the press conference but EUR/USD jumped towards 1.17 lifted also by a weak US CPI. While the asset-purchase programme will end by New Year, we still do not see a first rate hike from the ECB until December 2019.”

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