Markets await key central bank decisions

Key Movers

The Bank of England is poised to uphold its stance and keep interest rates steady for the third consecutive meeting today. Committee members' recent statements align with Governor Bailey's assertion of no rate cuts in sight. We expect the MPC to reaffirm this position during its meeting, effectively challenging excessive market expectations for easing. The rate vote is expected to remain divided 6-3 in favor of maintaining the status quo, but a shift cannot be ruled out, given recent UK economic data, including the softer-than-expected inflation and labor reports for October.

With market expectations for ECB rate cuts skyrocketing in recent weeks, the bar for a surprise from the central bank appears extremely high. It seems unlikely that the ECB could significantly exceed these expectations, implying that the euro is more likely to strengthen ahead of the meeting. If ECB President Christine Lagarde reinforces the stance that policy easing is premature, we could witness a rally in the common currency.

Fed Chair Jerome Powell emphasized the need for patience in combating inflation, reiterating that victory has not yet been achieved. Suggesting that they remain off the table for the foreseeable future. While market participants are anticipating a substantial downward revision to the 'dot plot' of interest rate projections, we believe that these expectations are overly optimistic.