The Pound declined against the Euro and the Dollar yesterday due to swings of risk appetite. Also to note BOE Governor King talked up the prospect of more QE at the next BOE meeting to help the recovery. Looking ahead, Q4 GDP forecast at -0.1% vs. 0.6% previously. January MPC Vote forecast at 0-9-0 for a consensus hold vote.
The Governor of the Bank of England, Sir Mervyn King, has urged against “despair” because “all crises come to an end” as official figures were expected to show that Britain is heading back to recession.
The Dollar made gains against the Pound and was choppy against the Euro. Volatility returned to the market with the EU finance ministers rejecting the Greek bondholders 4.0% coupon demand on a debt swap. Stocks dropped in Europe and in the US and helped the Dollar gain on safe haven demand. The dip was shallow though and most markets pared losses into the end of the session. Looking ahead, FOMC Interest Rate meeting forecast to hold at 0.25%. Focus on the FOMC Statement and Press Conference afterwards.
The Euro made gains against the Pound and the Dollar yesterday bolstered by optimism that Greece was set to cut a deal with its private sector investors on a debt swap. However, with little sign of a resolution as yet, the euro gave up some of its gains versus the dollar and other majors in early morning trade. The talks are now expected to be concluded by the end of this week. The main stumbling block at this point seems to be over what coupon creditors will receive on the planned new bonds. Some official say that Greece will pay not more than 3.5%, while creditors are pushing for more than 4%. European Union officials have stepped up pressure on Greece and its creditor banks in a complex game of three-way brinkmanship, signalling that they will allow a Greek default to run its course unless both sides accept more pain.
Data released 25th January 2012
UK 09.30 BoE Minutes of 11th – 12th MPC Meeting
UK 09.30 Prelim GDP (Q4)
UK 11.00 CBI Industrial Orders (January)
US 15.00 Pending Home Sales (December)
US 17.30 FOMC Interest Rate Announcement
US 19.15 FOMC Press Conference