30 Jul 2013
Flash: ECB and BOE. You Can Guide a Horse to Water – TD Securities
FXstreet.com (Barcelona) - Richard Kelly, Head of European Rates and FX Research at TD Securities notes the ECB and BoE this week.
Key Quotes:
“The differing approaches of the ECB and BoE will be back under the microscope this week and the overriding issue is the scope of commitment, or lack thereof, that each is willing to make”.
“The ECB is struggling with too much short-termism in their forward guidance and thresholds, which will leave European rates prone to underperform, but at least this week, we think the ECB can successfully once again push back on market rate expectations”.
“The BoE is having more traction with their threat of guidance, and while we think they will deliver with a more cohesive plan, this is not without risks for a divided MPC”.
“For the BoE this week, our base case is a statement which continues to try to massage rate expectations lower only somewhat less forcefully than last time, which would still help 2s5s flatten and weaker sterling, but markets will still keep focused on the August 7th Inflation Report”.
“The smorgasbord of alternatives, though, is biased towards a more dovish outcome, with a weaker sterling the most likely beneficiary, followed by a rally in credit and gilt maturities less than two years and perhaps out to three years”.
Key Quotes:
“The differing approaches of the ECB and BoE will be back under the microscope this week and the overriding issue is the scope of commitment, or lack thereof, that each is willing to make”.
“The ECB is struggling with too much short-termism in their forward guidance and thresholds, which will leave European rates prone to underperform, but at least this week, we think the ECB can successfully once again push back on market rate expectations”.
“The BoE is having more traction with their threat of guidance, and while we think they will deliver with a more cohesive plan, this is not without risks for a divided MPC”.
“For the BoE this week, our base case is a statement which continues to try to massage rate expectations lower only somewhat less forcefully than last time, which would still help 2s5s flatten and weaker sterling, but markets will still keep focused on the August 7th Inflation Report”.
“The smorgasbord of alternatives, though, is biased towards a more dovish outcome, with a weaker sterling the most likely beneficiary, followed by a rally in credit and gilt maturities less than two years and perhaps out to three years”.