Bank of England is expected to cut interest rates this week, 100 basis points

In the wake of U.S. mid-December the U.S. Federal Reserve cut interest rates 75 basis points triggered by sharp decline after the holiday trading remained generally stable. Global economic data continues to deteriorate, such as Korea exports in December fell 17.4 percent per annum. The United States, announced last Friday the United States in December ISM manufacturing index hit a 28-year low of 32.4, below the expected 35.4.

The key data this week will announce Friday the United States in December non-farm employment, our economists are expected to continue to reduce the 525,000 people in November to reduce the 533,000 people. In addition, this week will be announced December 16 the Federal Reserve interest rate meeting, investors want to explore the drop in interest rates can not be a backdrop, monetary policy will be how to further forward.

Bank of England this week will announce interest rate decision of the four is also the focus of market attention. Sunday Times (the Sunday Times) expected the Bank of England will cut interest rates 100 basis points. The OIS market is currently priced at 50 basis points rate cut.

We believe that the sharp decline in the dollar, the current market will return to risk aversion, the dollar will again be popular with investors seeking short-term liquid assets of the pursuit.

Sterling:

Thursday this week, Bank of England interest rate meeting will be the most critical risk event. We expect the UK central bank will further cut interest rates 100 basis points to 1.0 percent; and the market is widely expected to cut interest rates by 50 basis points. Other data this week, the United Kingdom is expected to make the market will not be surprised by the service sector PMI is expected to remain weak, housing prices index continued to slide.

Is expected to pound will continue to pressure the market focus will be the euro / sterling could reach parity in the short term.

Euro:

This week the euro zone will be published Thursday in Q3 GDP, we expect the contraction of 0.2 percent, in line with market expectations. Although the European Central Bank has begun to cut interest rates, economic growth continues to point to the downlink. Eurozone retail sales in November will be released Friday, we expect will further decline, but the market is generally expected to be a slight rebound. Monday will be published in Germany in November retail sales data to improve slightly. This week there will be major economies of the euro zone's services sector PMI data is expected to remain low. In addition, the euro zone and Germany are expected labor data is expected to continue weak.

Overall, the euro-zone economic outlook remains pessimistic, expected the European Central Bank will further cut interest rates, we believe that the recent rise of the euro will not be sustainable.

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