EUR and GBP Rise Towards Rate Decisions

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ECB and BOE meetings this morning should dominate the news today.   Both central banks are expected to keep their rates unchanged.  Most analysts are looking for the ECB to leave their rates unchanged for the balance of the year.  ECB President Draghi will meet the press following the announcement and traders are looking for further clarification on how the OMT will operate.  He is also expected to be questioned on Spain’s sovereign debt problems.  

The BOE should also announce continuing their asset purchase program at GBP 375 billion. Analysts expect that the quantitative easing program will be expanded again after the latest program completes in November.

Spain has a debt auction later today and all eyes should be focused there.  Spain will attempt to sell EUR 4 billion in 2014, 2015, and 2017.  It is hoped that the yields on these bonds will stay below the 6% level.  Once again Spanish Prime Minister Rajoy said yesterday that requesting a bailout is not imminent.  IMF MD Lagarde has offered Spain help in auditing and monitoring reforms, as well as help in financing if requested.

Later today, the FOMC releases their minutes from their last meeting.  These minutes are important since the FED announced their unlimited QE3 program during this meeting. During this meeting some FED governors were calling for an unemployment rate between 5-6% before the stimulus program could end.  It will be interesting to see the comments made during the meeting regarding this.

Both the EUR and the GBP have moved higher in overnight trading as the markets await the respective central bank announcements.  As I write this at 4:30 am, both currencies are trading just off their overnight highs.

Asian equity markets were mostly higher overnight, while European equity markets are mostly higher this morning.  DOW Futures are positive indicating a strong start to the US equity market.

Further reading EURUSD prediction.

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Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group.

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