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The daily outlook

BoE hold interest rates and QE

Today, the MPC voted to leave their rates unchanged and in addition held QE at £200 billion. The improved PMI data yesterday and the up tick in the revised Q4 GDP to 0.3% helped to reinforce this stance. Personally, I would be very surprised to see any change in monetary policy before the general election on rates or QE. However we have been surprised in the past by the BoE and we could be again; today the markets will be looking for any subtle changes in tome and sentiment on future monetary policy projections in the statement. The minutes in two weeks time will probably help to shed more light than todays decision from the BoE on future moves. Sterling has held firm after making gains yesterday against the USD and the JPY; Sterling was boosted by improvements in consumer confidence and PMI data and the austerity measures announced by Greece. The 1.50 rate on GBP/USD is still the psychological that the pound needs to hold above and build on.

The euro has managed to improve against the USD moving towards the 1.37 area. Greece announced yesterday its austerity package, including wage cuts, pension freezes and increases in VAT. Although these measures were widely anticipated the markets were comforted on the release and supportive comments by Jose Barroso, the president of the EU commission. The FX market likes clear and defined plans and the measures have helped to ease the fears and in addition raised hopes of more support from the EU. The measures are not going down too well with the Greek public and we have already seen the protestations on the severe measures. Portugal is also bracing itself for strikes on their austerity measures. We can expect this to be a common theme throughout Europe and post election in the UK as the public suffer to compensate for repaying bulging deficits.

Yesterday we also had good data from the US, with the Fed beige book highlighting an improvement in activity levels. We have the big one tomorrow in the US monthly non-farm payroll data giving more feedback on the health of the US labour market.