The Euro and the Pound to drift before the ECB and the BoE

By Peter Nurse

The dollar decreased at the beginning of the european session on Thursday, before the two monetary developments the major in Europe.

The european central Bank will announce the results of its latest lending operation in the long term, which is the first at which banks can borrow at the new lower limit of 1% only. Given the doubts about the effectiveness of negative interest rates, a strong turnout will constitute a vote of confidence in the ability of the ECB to continue to support the economy through monetary policy (and vice versa). Last week, Isabel Schnabel, member of the Board of the ECB, has indicated expectations of a demand of approximately 1 400 billion euros.

The results of the TLTRO will be followed by the announcement of the policy of the Bank of England at 13.00.

The pound sterling declined in early trading Thursday, while it expects the central bank to increase its programme of quantitative easing to 100 to 150 billion pounds. The british economy has been particularly hard-hit by the outbreak of coronavirus and, according to forecasts of the Organization for economic cooperation and development (OECD), it is the G7 country whose economy is most affected this year.

“Our economist thinks that the goal of quantitative easing will be increased by 150 billion pounds, while the consensus is that 100 billion pounds”, said the analysts of ING (AS:INGA) in a research note. “Our expectation is motivated in part by practical considerations. If purchases continue at the current pace, the goal will be achieved towards the meeting of September – leaving the MPC in a position to make a hurried decision after the summer.”

The GBP/USD fell 0.1% to 1,2538, while the EUR/GBP is up 0.2% to 0,8974.

At 10: 15, the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.1% to 97,013. The EUR/USD gained 0.1% to 1,1251, the USD/JPY has declined 0.1% to 106,86, while the AUD/USD risk-sensitive, declined by 0.2% to 0,6867.

The central bank Norwegian must also meet later Thursday, and it is widely expected to maintain its benchmark interest rate unchanged at 0.0%.

“The developments since the may meeting have clearly been positive and, at the very least, the downside risk is significantly reduced”, said the analysts of the Danske Bank in a research note. “We therefore expect the Bank of Norway that it is revising its projections upward and the trajectory of interest rates that accompanies it indicates a gradual increase in key rates from the end of 2022”.

The USD/NOK has increased from 0.1% to 9,5286 and EUR/NOK of 0.1% to 10,722.

The operations of the central bank take place in a context of resurgence of new cases of coronavirus in the United States and China, which was hit this week with the currency sensitive to risk.

“The markets are currently two opposing forces for risk assets. The increase in cases of Covid-19 in the United States and China and the associated risk to the economies, as well as the stimulus measures (both monetary and the outlook of the new budgetary measures),” said analysts at ING.

The latest applications for weekly unemployment benefits in the United States at 14: 30 can play an important role in the fact that greed and / or fear sets the tone for the rest of the day.

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