FXstreet.com

FX Strategy

This report has been deactivated

26

0

FX central bank previews: BoE, ECB, SNB and DN

Wed, Nov 5 2008, 17:09 GMT
by Kasper Kirkegaard, John Hydeskov

Danske Bank A/S


Thursday will be a busy day for central bank watchers: We have pencilled in rate cuts from the Bank of England (BoE), the European Central Bank (ECB) - each of 50bp - and we expect Danmarks Nationalbank (DN) to follow the ECB and lower rates by the same magnitude. Risk of an intermeeting cut from the Swiss National Bank (SNB) has risen.

We expect the Bank of England (BoE) to cut the base rate by 50bp to 4.00% on Thursday 13.00CET. Even though CPI inflation remains skyhigh at 5.2%, price concerns have lost their importance as economic conditions have deteriorated extremely fast. We believe the UK is in recession and will probably remain there into 2010. Stimulation is very much required and there are rumblings that the BoE might be 'behind the curve'.

Our expectation of 'just' a 50bp cut relies on three factors: 1) Even though the MPC's hawks have been muzzled, inflation concerns are not dead and buried. Large rate cuts can push current inflation higher and lead to persistently higher inflation expectations with negative and undesirable long-term consequences. 2) Every central bank wants monetary policy to contribute to stability - not the opposite. After having cut rates aggressively, the RBA had to stabilise the AUD - something that might have been avoided if the RBA had lowered rates more gently. 3) Since the BoE became independent, it has never lowered (or raised) the base rate by more than 50bp. One has to go all the way back to 1993 to see more aggressive easing.


Archive

Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

Legal disclaimer and risk disclosure

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Related reports

FX View - Headline unemployment rate creates dollar shocker by Interactive Brokers LLC
Fri, Nov 6 2009, 18:41 GMT

Forex Daily Overview - USD mixed, unemployment rises to 10.2% by Easy Forex
Fri, Nov 6 2009, 18:31 GMT

Weekly Market Commentary - Fed, BOE and ECB kept rates on hold by Mizuho Corporate Bank
Fri, Nov 6 2009, 15:45 GMT

Forex Daily Analysis - USDJPY is moving towards support level at 89.55 by Investija.com
Fri, Nov 6 2009, 14:35 GMT

Forex Technical Report - U.S. Markets Brace for Jobs Data by ForexHound.com
Fri, Nov 6 2009, 13:29 GMT

audusd, eurusd, rba, boe, ecb, centralbanks, interestrate, snb, eurgbp, gbpusd, usdchf, eurchf

View All

Related content


Interested in forex trading? forex brokerage firms!


MG Financial Group
Contact the broker/FDM
Open a demo account
ACM Advanced Currency Markets SA
Contact the broker/FDM
Open a demo account
IG Markets
Contact the broker/FDM
Open a demo account
CitiFX Pro
Contact the broker/FDM
Open a demo account
FXDD
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2009 "FXstreet.com. The Forex Market" All Rights Reserved.