Gloomy Markets Will Keep BOE Dovish

14 Jan, 2016, 03:14 ET from FxPro

LONDON, January 14, 2016 /PRNewswire/ --

So yesterday's bout of risk was indeed temporary as we've seen yet another sea of red across Asian markets overnight and European indices are due to head down back towards their lows of the year. On the FTSE 100 the key level to the downside is around 5760, last August's low and for the Dax 9300 is major support where a double bottom formed in the second half of 2015. Both indices are some way off these levels but this morning they are expected to open lower by over one percent bringing these key support areas closer. The only bright spot overnight has been better than expected Australian unemployment data which saw the rate remain at 5.8% when it was expected to rise to 5.9% and so AUDUSD is attempting to stage a recovery back above the 0.7000 level trading off earlier lows at 0.6965 at the time of writing.

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For today the focus will be on the Bank of England. In the earlier part of 2015 the debate was around whom out of the BOE and the Fed would move first and then as the year went on it shifted to divergence and just how long it would be before the BOE follows the Fed in commencing its tightening cycle. Sterling has had a terrible start to the year as it has been talked down by analysts and politicians warning about risks to the UK economy have not helped the pound's cause. Today we are expecting a dovish tone to the BOE who insist that their decision will be determined by the outlook for inflation. Given the weakness in crude prices it comes as little surprise that predictions for the first rate hike are slowly but surely being pushed into the latter part of 2016.

Simon Smith, Chief Economist 

Twitter: @simonsmithy

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