Sterling and Central Bank Decisions

EUR/GBP made again a temporary spike higher in afternoon trade and filled offers just north of the 0.8050 barrier. This might have been due to an adjustment of positions in cable ahead of the BoE meeting. The move was again reversed as the euro ceded ground across the board at the end of the trading in Europe. EUR/GBP closed the session at 0.8034, almost unchanged from the 0.8036 close on Tuesday.
Today, will be a busy day for EUR/GBP traders as both the BoE and the ECB will decide on monetary policy. Everything looks in place for the BoE to restart the program of asset purchases. Activity data confirm that activity in the UK is slowing. At the same time inflation is at a 2 ½-year low. The MPC was already close to a restart of the program last month with governor King in favor of £50B of asset purchases. So, the debate in the market is whether the BoE will announce £50 or £75B of bond purchases. One remark on the sidelines: of late (e.g. in the hearing before a committee of Parliament), BoE members apparently were aware that the impact of more bond buying on the economy would not be spectacular anymore.