BoE MPC vote 9-0 to keep rates on hold

Fundamental View

Yesterday we saw muted movement for the majority of the day. Correlations seemed to prevail in the afternoon as we saw US Government Fixed Income make new highs before reverting lower and the SP move lower to test the 2000 handle before returning higher. We saw the German ZEW post expectations at 48.4 against an expected 40. Ultimately we didn’t see too much of a move initially as the majority of players across the globe are awaiting the composition of the ECB’s Quantitative Easing programme. Oil had its second day lower, settling at the previous low around $46.40bbl. This had a correlated effect in equities as we saw a leg lower in stocks before the majority of US bourses found support at technical handles. Gold had another good day as a result of further safe haven flows rising to almost test the $1300 handle. In the end the S&P responded well bouncing in the latter part of the day to finish largely unchanged on the session.

Today's View

This morning's main event was the Bank of England minutes that surprisingly showed a change in voting by the MPC. In the monetary policy meeting two weeks ago all 9 members voted for no change to interest rates. For the last three months the voting has been 7-2 with two members wanting to raise rates. It seems the continued slide in inflation at teh end of 2014 has taken a BoE rate hike completely off the agenda for 2015. Stirling spiked 80 pips lower off the news but has since stabalised. other than this it has been a quiet morning with all eyes on tomorrow's key ECB monetary policy meeting. The Euro has been tracking sideways this week trapped between 1.1650 and 1.1550. QE is priced in at these levels. It is now a matter of waiting to find out the finer details of the expected ECB QE programme: size, composition, timings and whether each nation will be liable for any losses on their own debt or whether the burden will be shared by the union. This afternoon sees Housing Starts and Building Permits released from the US at 13.30 but outside of this we expect a quiet session. We remain with a neutral to bearish view on stocks, EURUSD, Crude oil and a neutral to bullish view on T-Notes.