Central Bank Watch Overview:
- The BOE and the ECB are meeting later this month, but focus is on what they’ll do later this year and beyond.
- The BOE is further along the path of normalization, while the ECB is still toying with ideas about how it may further enhance its stimulus measures in context of rising inflation pressures.
- Retail trader positioning[1]suggests that EUR/USD[2] has a mixed bias while GBP/USD[3] has a bearish bias.
Inflation Making Central Bankers Uneasy
In this edition of Central Bank Watch, we’ll cover the two major central banks in Europe: the Bank of England and the European Central Bank. Neither of Europe’s most significant central banks won’t meet again until later this month, allowing for the EUR[4]- and GBP[5]-crosses to toy with speculation over forthcoming policy moves. And while one of the central banks has begun to throttle back its QE program, the other is grappling with its desire to provide additional stimulus against the backdrop of rising inflationary pressures.
For more information on central banks, please visit the DailyFX Central Bank Release Calendar.[6]
BOE Keeping Calm, But Warns of Inflation
The BOE has already made the adjustment to its bond buying program so that it will no longer reach its £875 billion target in early-October. QE continues, but at a slower pace. But in recent days, BOE Chief Economist Andy Haldane has rung the alarm bell about inflation, suggesting that the BOE may have some more hawkish inclinations than what’s currently priced-in.
At a UK Treasury Select Committee hearing last week, the BOE’s chief economist said that “an upside surprise to inflation is among the greatest risks” as it would force policymakers “to tighten policy even
