Europe Day Ahead: ECB, BoE Meetings in Focus

Economic Events:

The main events in the day are the European Central Bank meeting and the Bank of England asset purchases program.

The European Central Bank is widely expected to keep its interest rates on hold Thursday for a second month in a row. The ECB cuts in November and December brought rates to the lowest level yet at 1 percent.

The Bank of England is scheduled to declare its bank rate for the month of February, 2012, at 12:00 GMT. The Bank of England's Monetary Policy Committee maintained the official Bank Rate paid on commercial bank reserves at 0.5 percent in January.

The Bank of England asset purchases program is completing early February and analysts at Credit Agricole Research expect the the BoE to announce additional asset purchases amounting GBP50 billion at its meeting Thursday, which would bring the total size of the QE program to GBP325 billion.

The Office for National Statistics (ONS) is due to report its monthly UK industrial production figures for the month of December, 2011, at 09:30 GMT. The Index of Production is expected to rise 0.2 percent in the month of December compared to 0.6 percent decline in November. Seasonally adjusted manufacturing output is expected to rise by 0.3 percent compared to 0.2 percent decline in November.

Forex:

So far Greek leaders have managed to agree on most of the austerity measures demanded by their lenders except the condition regarding pension cuts. A deal will pave the way for debt restructuring and a new loan package for the country is due to be discussed between eurozone finance officials. However, analysts at Credit Agricole said the EUR has already priced in a lot of good news on this front and even agreements on the issues above may not see the currency push much higher, with strong resistance around EUR/USD 1.3388.

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