Forex Forecast

BoE Policy Details Emerge GBP was the big-mover in the European session as more details emerged about the BoE’s Extended Collateral Term Repo (ECTR) Facility.

No New BoJ Easing The Bank of Japan took no further easing steps at its policy meeting overnight. USDJPY was unmoved on the BoJ announcement itself, but a cascade of stop losses earlier sent the pair 50 pips lower.

BoE Provides Liquidity Support The UK’s Finance Minister Osborne announced that the government and the BoE will jointly launch a new bank funding scheme with the aim of boosting bank lending to the real economy.

Spain Downgraded Overnight The RBNZ kept the benchmark rate unchanged at 2.5%. Governor Bollard said it is appropriate for policy to remain stimulatory given the weaker economic outlook, but the policy statement dropped the reference to NZD being overvalued.

RBNZ On Hold The RBNZ kept the benchmark cash rate at 2.5%. Governor Bollard said it is appropriate for policy to remain stimulatory given the weaker economic outlook, but he dropped the reference to NZD being overvalued (which appeared in the April policy statement).

Euro Pushes Higher Risk currencies continued to grind higher in the European session. With core fixed income selling off and equity markets on a reasonable footing, the euro pushed up towards 1.2550.

RBNZ Expected To Hold FX markets traded in tight ranges overnight ahead of Greece’s weekend election. USDJPY nudged a little higher, and we would not be surprised to see some minor further upside ahead of the BoJ’s policy announcement on Friday.

Eurozone Bonds Sell Off Spanish sovereign bonds continued to weaken on Tuesday. The 10y yield set a new euro-lifetime high and ultimately rose 19 bp on the day.

Sentiment Steadies, For Now FX investor sentiment stabilized overnight despite weaker Asian equities and the S&P500 closing down 1.26%. Where we go from here will depend largely on how Eurozone bond markets perform from the open today.

Spanish Bank Bail-Out Agreed Spain became the fourth Eurozone member to seek the EU’s bailout. After Saturday’s conference call, the Eurozone finance ministers’ group announced it will lend up to €100bn to Spain to recapitalize its banks, in a bailout that puts no new reform conditions on the Spanish government – something that Spain has […]

Saturday Call on Spain? EU sources suggest that a Eurogroup conference call on Saturday will discuss details of a Spanish aid request. The sources said it was expected that Spain’s formal request for aid for its banks will come this weekend.