From a calendar catalysts perspective, this is an important data point to consider because it provides the Bank of England the needed political ammo to drop rates big time on the Thursday – the market is begging for it. The FTSE in London closed on its highs, at +1.3% on the day, in anticipation, I think, of a BIG cut.
If they don’t cut BIG, the market’s latest “re-flation” puts itself in a position to be down BIG, on that news… we do not have edge on what the magnitude of the rate cut will be, so we will only watch the leading indicators that we always do (European stocks, currencies and bonds) and sit tight.
For now, the Euro has dropped to 1.34 vs. the USD on the day - this weakness in the Euro Zone’s 10 year old currency, alongside stock market strength has raised the bar of expectations on the British, considerably. THE QUESTION is, will they deliver?
Keith R. McCullough
CEO & Chief Investment Officer