07/08/2014: Trading outlook ahead of the BoE, ECB and the US session

This morning’s trading has been fairly sedate with traders concentrating on the key central bank meetings of both the Bank of England (12:00BST) and the European Central Bank (12:45BST) but also the press conference by Mario Draghi at 13:30BST. Neither central bank is expected to change policy at all, but Mario Draghi may well have to field questions of the speed of implementation of the easing measures announced in June.

Investors have been fairly unmoved by the news of Russia’s retaliatory sanctions against EU and US agricultural products. Equity markets are only showing a slight decline now having pared some of the earlier downside. Additionally, gold and silver which both spiked strongly yesterday afternoon are also broadly flat.

Ahead of the key central bank meetings, there has been little change on forex markets throughout the morning. A 27 pip range on Euro/Dollar and 32 pip band on Cable suggest pensive trading. Both pairs are basically flat in front of the meetings. In fact the only real move on the day remains the Aussie dollar weakness after the disappointing increase in unemployment. Even then though as the morning has progressed, the Aussie has flattened off in its decline.

The key central bank meetings are likely to drive trading in the afternoon, however for the Bank of England we are highly unlikely to see anything that will shock the markets. The two more important announcements are likely to be the BoE’s Quarterly Inflation Report on 13th August and also the MPC meeting minutes in a couple of weeks time. Again with the European Central Bank there is little that will be announced in the official release, with no change to the measured announced in June. With the ECB just getting going on implementing the easing measures (which could take up to the end of the year to do) Mario Draghi is not expected to rock the boat too much. He may be pushed on the implications of Italy falling into recession and updates on potential QE, but again the press conference is not expected to contain anything ground breaking.

It may well therefore be down to the US Weekly Jobless Claims to make an impact. Expectation is for a slight increase in claims to 305,000 (from 302,000 last week) but the trend remains positive and this increase would not be seen as too bad a number.

Euro/Dollar moves on “ECB Day” have been volatile in recent months, but this time round it looks like it will be a bit more sedate.

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