– RBNZ on hold but more hawkish than expected
– No change from ECB and BoE expected today
– We recommend buying 6m USDBRL puts financed by selling 3m double one-touch
What to watch for today
EUR: ECB watch. The ECB meets this week, but the recent upturn in PMI data and the Ifo make it likely that it will again choose to leave policy unchanged. A 25bp cut to the repo rate to 50bp is probably the ECB’s next step, but our economics team now looks for this to occur in Q1, as the latest data flow has likely removed any sense of urgency. A new LTRO announcement is another possibility, though banking liquidity conditions don’t seem to necessitate this either. However, the ECB staff projections and ECB President Draghi’s press conference are likely to continue to highlight downside risks to growth, and market expectations for further policy accommodation in 2013 should stay elevated. On the data front, markets are looking for a 1.0%mom rebound in German factory orders.
Click here to read the full report: FX Daily
Credit Suisse