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ECB & BOE to Keep Rates on Hold – Sept 5

September 5, 2013

With Syrian uncertainty still looming, market is waiting for the coming big events. Though 5 Monetary Policy Statements this week may not have enough to offer because non of them will alter their policy stance. But tomorrow’s US non-farm payroll data may carry enough substance to provide market with the much needed guidance. Volumes have been thin and trading activity is within a narrow range, as liquidity is more dearer in fear of FED’s stimulus plan due in next couple of weeks.
Whereas, elsewhere overall Global sentiment has improved, as positive economic changes is clearly visible. Recently, Chinese economy has shown signs of recovery and Japan too, though in struggling mode may have seen the worst. Its a different story with the emerging market sufferings, as they are too dependent on foreign money and the outflow from bond and equity is the cause of havoc, since investors are estimated to have pulled away nearly USD 6 billion, as per EPFR data that monitors fund movement. The is one of the major cause of pressure on their currencies.
In Europe, German economic recovery has encouraged France, Italy and Spain the other major economies of the Euro-zone region and today’s ECB policy guidance on regions economy may depict a better picture, although ECB President may adopt cautious to mildly Dovish approach. Dovish could be in the sense that ECB may provide signal that it may not allow any sort of damage to the economy and will be available to provide liquidity with its continued softer or accommodative policy stance for longer period of time, which is commonly quoted as forward guidance by the global Central Banks. However, it is the press statement of Mario Draghi that will matter most. He has to maintain a balance-approach for his forward guidance commitment.
Meanwhile, yesterday’s FED Beige Book announcement was not taken seriously probably because there are too many events due in next couple of days. It signaled that US economy expanded fat a “Modest to Moderate” pace. This gives huge support to the FED’s plan. Today there are some important US data that should help to built up sentiment for tomorrow’s big event.

GMT 3:12 – EURO @ 1.3188 = The fate of Euro’s move today, which could be choppy will largely depend on Draghi’s statement. though prior to ECB policy announcement Euro should hold above 1.3140, but bias should be mildly on the upside. Break of 1.3280-90 is required to challenge 1.3350-80 zones. However on the downside protection is at 1.3050 that may not surrender.

GMT 3:19 – GOLD @ $ 1393 = Should hold around $ 1396-98 for a move towards $ 1382-84, break would encourage for $ 1377. Or else $ 1405, break of this levels could see more gains.
GMT 3:22  – GBP @ 1.5614 = Should hold above 1.5580-90 levels for a move towards 1.5655-65. but needs to move beyond 1.5690-95 for more gains, which may not happen. On the downside 1.5550 is the level to watch.
GMT 3:34 – JPY @ 99.69 = As long as 99.20-30 holds risk is for a break and test of 100 levels for 100.20-40. However, clear break is required for a move towards 100.75-80.  Failing to surpass 100.40 would see another test of 99.30 zones.
GMT 3:38 – AUD @ 0.9159 = Aussie has support around 0.9110-20 levels and is likely to hold for 0.9195-00. Break is required for 0.9235. Or else 0.9050.

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