Talking Points

• Bank of England Interest Rate Decision Unlikely to Bring Changes in Policy
• EU Growth Forecasts to Quantify Impact of Slowdown on Deficit Reduction
• ECB Monthly Report May Help Gauge Support Needed for Italian Bonds
• NZ Dollar Sold as PMI, Consumer Confidence Data Weigh on Rate Outlook

Most major currencies were little changed in overnight trade as markets digested the intense volatility of the preceding 24 hours. TheNew Zealand Dollar came under pressure amid disappointing economic data. TheBusiness NZ PMI gauge fell below the 50 “boom-bust” level for the first time since March to show the factory sector shrank at the fastest pace since in over two years. Separately, theANZ Consumer Confidence Index fell for the third consecutive month, registering the weakest reading in six months. The soft outcomes weighed on RBNZ rate hike expectations, with a Credit Suisse metric of investors’ priced-in tightening expectations down to the lowest level in a month.

Looking ahead, the monetary policy announcement from theBank of England headlines the economic calendar.It seems unlikely that the central bank will meaningfully alter the policy mix having just topped-up its asset purchase program last month, withGovernorMervyn King and company in wait-and-see mode. The next crucial inflection point as the near-term outlook take shape will be the release of the central bank’s quarterlyInflation Report, due to cross the wires next week.

Elsewhere, theEuropean Commission will release its updated set of economic forecasts while theEuropean Central Bank unveils November’s monthly report. Traders will approach the former from the perspective of the debt crisis gripping the region, sizing up the degree to which slowing growth will impact tax receipts and impair government’s ability to balance their books. Meanwhile, the latter will be scrutinized for any insight on the degree of support given to Italian debt from central bank buying as a gauge of how extensive future efforts will have to be to contain the current run-up in borrowing costs.

Asia Session: What Happened

Euro Session: What to Expect

Critical Levels

---Written byIlya Spivak, Currency Strategist forDailyfx.com

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