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Today the markets will be focused upon the interest rate decisions from the Bank Of England and the European Central Banks. First up is the BoE- the markets will be waiting to see what the MPC do with QE- the UK asset purchase scheme. Will they hold firm at the current level of £200 billion? Will they expand by a further £25 billion? Or will they signal the completion of the asset purchase- or at least pause? There are valid arguments for all scenarios, however I feel that the most likely scenario is that the Bank will not extend now but leave the door open for future extension if deemed necessary. For sterling any signal on further extension would be negative and any closure or pause should be positive.

For the ECB the statement after the meeting will be all important and the situation in Greece, Spain and Portugal will be scrutinized. Trichet usually dances through tough questions without giving too much away so we are not likely to get any major surprises here.

In economic data today the UK Halifax House Price Index has come in as expected at +0.6% month on month. Yesterday US ADP employment data showed a loss of 22,000 private sector jobs and US earnings disappointed. This may have contributed to the jittery markets this morning with European stocks lower and oil and gold down. The reflection in the currency markets of the nerves is also evident with GBP/JPY falling into 143 levels and USD gaining against the pound and the euro.

Discuss on this on the Currency Exchange Forum