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7 Mar 2013
Fundamental Afternoon Wrap: No Twist as Banks hold
A quiet afternoon for institutional research sees an understandable focus on EUR and GBP, with both the ECB and BoE delivering unchanged policy decisions this afternoon. The consensus appears to be that a rate cut will follow for the BoE, if not now then most likely in a months time when the budget is announced and a new mandate for the bank can be discussed. All eyes ahead to tomorrows NFPs.
EUR
Brown Brothers Harriman analysts note that the S&P upgraded Portugal´s outlook from negative to stable, which may have help spur some Euro buying. Carston Brzeski of ING notes that at today's Press Conference, ECB President Draghi had a little something for everyone, writing “ A bit of dovishness to dampen the exchange rate and a bit of hawkishness and positivity to counter economic doom-thinkers. The door to a rate cut was not opened further, neither was it closed. It has become a revolving door. In fact, Draghi gave an elegant “we-never-pre-commit” show, keeping all options open.”
GBP
Brown Brothers Harriman analysts note that the Tory led coalition government has stuck to its guns over the tightening of its fiscal policy, adding more pressure to the BoE to ease monetary conditions. Catherine Stephan of BNP Paribas notes that the BoE held policy, but suspects that it may also wait until March 20th to take action when the UK Budget is presented and a new mandate could be discussed, a point reiterated by Ross Walker of RBS. Jane Foley of Rabobank points out that despite the inactivity of the BoE, the fact that a policy easing discussion even exists indicates that action is more likely to follow at some point. Phillip Rush of Nomura extends this view, commenting “We still expect further disappointment in the recovery and see a strong risk (40%) that this triggers more QE later this year.”
EUR
Brown Brothers Harriman analysts note that the S&P upgraded Portugal´s outlook from negative to stable, which may have help spur some Euro buying. Carston Brzeski of ING notes that at today's Press Conference, ECB President Draghi had a little something for everyone, writing “ A bit of dovishness to dampen the exchange rate and a bit of hawkishness and positivity to counter economic doom-thinkers. The door to a rate cut was not opened further, neither was it closed. It has become a revolving door. In fact, Draghi gave an elegant “we-never-pre-commit” show, keeping all options open.”
GBP
Brown Brothers Harriman analysts note that the Tory led coalition government has stuck to its guns over the tightening of its fiscal policy, adding more pressure to the BoE to ease monetary conditions. Catherine Stephan of BNP Paribas notes that the BoE held policy, but suspects that it may also wait until March 20th to take action when the UK Budget is presented and a new mandate could be discussed, a point reiterated by Ross Walker of RBS. Jane Foley of Rabobank points out that despite the inactivity of the BoE, the fact that a policy easing discussion even exists indicates that action is more likely to follow at some point. Phillip Rush of Nomura extends this view, commenting “We still expect further disappointment in the recovery and see a strong risk (40%) that this triggers more QE later this year.”