Partner Center Find a Broker

Trading conditions were rather subdued during the morning London session. And many currency pairs were just milling about in tight ranges.

There were some themes playing out, though, namely the yen’s overall poor performance, likely because of the risk-on vibes in Europe.

The pound is also noteworthy and is arguably the only real mover of the morning London session since it trended broadly higher before the BOE statement, but got slapped lower across the board when the BOE finally announced its monetary policy decision.

The pound was able to hang onto its gains, however, so it was the best-performing currency in what was a mostly steady session.

  • As expected, 9-0 vote to maintain the BOE’s Bank Rate at 0.75%
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B
  • ECB announced no changes to current monetary policy
  • ECB maintained refinancing rate at 0.00%
  • Marginal lending rate steady at at 0.25%
  • Likewise, deposit rate unchanged at -0.40%
  • QE at €30B per month will continue until the end of the month
  • Reduced QE extension at €15B per month until December reaffirmed
  • Forward guidance that QE program will end after December also reaffirmed
  • ECB repeated forward guidance that rates ain’t moving “through the summer of 2019″
  • ECB presser coming up; watch it live here
  • Turkey’s central bank hikes rates

Major Events/Reports:

MPC decision and meeting minutes

The BOE’s MPC released the minutes for their latest monetary policy huddle late into the session.

And the main takeaways are:

  1. The BOE maintained its current monetary policy
  2. The British economy is evolving as expected
  3. The BOE still has a hiking bias
  4. The BOE noted that Brexit uncertainty has increased

And if you want more, then below are some of the more important and/or interesting points in, well, bullet points for easier reading (emphasis mine):

  • 9-0 vote to maintain the Bank Rate at 0.75%
  • 9-0 vote was expected
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B
  • With regard to Brexit, the minutes noted that “there had been indications, most prominently in financial markets, of greater uncertainty about future developments in the withdrawal process.”
  • The BOE also tried to reassure markets by noting in the minutes that “The UK’s direct trade linkages and banking sector exposures to Turkey and Argentina were limited.”
  • UK GDP had grown by 0.4% in 2018 Q2, in line with the Committee’s expectations.”
  • The BOE even upgraded its GDP growth projections for Q3 “to 0.5% from the 0.4% expected at the time of the August Report.”
  • And with regard to wage growth, the BOE stated that “Evidence from pay settlements and surveys was consistent with some further rise in earnings growth.”
  • CPI inflation had been 2.5% in July, marginally lower than expected” but still within expectations.
  • Overall, the BOE judges that “The MPC’s August projections appeared to be broadly on track.”
  • And “were the economy to continue to develop broadly in line with the August Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to the 2% target at a conventional horizon.”

ECB’s monetary policy decision

As widely expected, the ECB stated in its official press statement that no changes were made to the current monetary policy.

The refinancing rate is is therefore unchanged at 0.00%, while the marginal lending rate is steady at 0.25%. As for the deposit rate, that’s still at -0.40%.

The ECB also reaffirmed that its QE program will continue at a monthly pace of €30 billion until the end of this month, and will then continue at a reduced monthly pace of €15 billion until the end of December 2018.

And after December, the ECB reaffirmed its forward guidance that “net purchases will then end,” provided that “incoming data [confirms] the [ECB’s] medium-term inflation outlook.”

As for interest rates, the ECB reiterated its forward guidance that:

“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019”

Overall, nothing really new. Market players are now sitting tight for what ECB Overlord Draghi has to say in the ECB presser. And if you didn’t know, you can watch the ECB presser live by clicking here, if you’re interested.

CBRT hikes

The BOE and the ECB weren’t the only central banks that were under the spotlight since the Central Bank of the Republic of Turkey (CBRT) also got some attention, thanks to the CBRT’s decision to hike rates in order to rein in Turkey’s inflation.

Another risk-friendly day in Europe

The major European equity indices had another good run today. And market analysts say that the risk-friendly vibes in Europe were sustained by easing trade tensions on earlier news that the U.S. and China will try to have a meeting of the minds again.

  • The pan-European FTSEurofirst 300 was up by 0.24% to 1,476.57
  • Germany’s DAX was up by 0.60% to 12,104.86
  • The blue-chip Euro Stoxx 50 was up by 0.43% to 3,342.45

Major Market Mover(s):

GBP

The pound caught a bid just before the morning London session rolled around and then continued to steadily trend higher across the board.

There weren’t any apparent catalysts, but some market analysts were pointing to the more general theme of growing hopes for a Brexit deal.

Of course, preemptive positioning ahead of the BOE statement is also a possibility.

And that does seem to be the case since the pound reacted to the BOE statement by weakening across the board, even though the BOE didn’t really say anything too surprising and still has a hiking bias.

GBP/USD was up by 12 pips (+0.09%) to 1.3047 but reached an intraday high of 1.3068 pre-BOE, GBP/JPY was up by 28 pips (+0.20%) to 145.57 but reached an intraday high of 145.76 pre-BOE, GBP/CHF was up by 14 pips (+0.11%) to 1.2651 but reached an intraday high of 1.2669 pre-BOE

JPY

The safe-haven yen was nudged broadly lower and was the worst-performing currency of the morning London session, likely because of the risk-friendly vibes in Europe.

USD/JPY was up by 11 pips (+0.10%) to 111.55, EUR/JPY was up by 12 pips (+0.09%) to 129.67, CHF/JPY was up by 12 pips (+0.11%) to 115.08

Watch Out For:

  • 12:30 pm GMT: ECB presser; watch it live here
  • 12:30 pm GMT: Headline (0.3% expected vs. 0.2% previous) and core (0.2% expected, same as previous) readings for U.S. CPI
  • 12:30 pm GMT: U.S. initial jobless claims (210K expected vs. 203K previous)
  • 12:30 pm GMT: Canada’s NHPI (0.1% expected, same as previous)
  • 2:00 pm GMT: U.S. Fed Governor Randal Quarles will testify before the Senate Banking Committee
  • 5:15 pm GMT: Atlanta Fed President Raphael Bostic is scheduled to speak
  • 6:00 pm GMT: U.S. Federal budget balance (-$169.8B expected vs. -$76.9B previous)
  • British PM Theresa May will meet her top people to discuss plans for a “no-deal” Brexit later
❗Pssst. Have you seen the BabyPips.com Forums’ fresh new look? It just got a makeover! You gotta see it. Plus, we’re doing a crazy easy giveaway! 🎁