Other central bank meetings – BoE, Fed, BOJ
Aside from the specific meeting of the ECB, Mr Vessey said general meetings of the Bank of England (BoE), US Federal Reserve (Fed), and the Bank of Japan (BOJ), should be closely observed.
Mr Vessey said: “These central bank meetings are risk events for currency markets as any change to monetary policy, particularly the dialling back of stimulus, could ramp up volatility throughout financial markets, which has recently been languishing, especially for GBP/EUR.”
He explained the reason so much focus is on central banks is, if we do see a tapering of bond purchases, the market might interpret this as bullish for that currency and the prospect of interest rate rises will also increase – leading to even greater currency appreciation.
However, tightening policy in this way is also reducing liquidity from markets and investors may interpret this negatively.