There is genuine uncertainty over the outcome of the two central bank meetings later today. First up is the Bank of England, who cannot lower interest rates but can restart the printing presses with the aim of holding down long-term rates. Adam Posen has been the lone voice on the MPC calling for further quantitative easing but recent comments from other members suggest this months vote will be much closer. The nine man panel only needs a majority in the vote, or four of eight changing their mind for QE to be restarted and the market is at a loss as to whether that will happen this month or next. Sterling is trading flat and will continue to tread water until we get the result, due at midday.

After the BoE announcement is the ECB rate decision, and more importantly current ECB head Jean-Claude Trichet’s last press briefing before handing over the reins to incoming President Mario Draghi. The ECB does have room to cut rates and will look to do so either this month or next, hence the run up in Sterling and Dollar against the Euro over the last week. The ECB also has the option of QE (which the executive board is currently against) and may be forced into this given the severity of sovereign debt crisis. The two central bank meetings and the potential outcomes suggest GBPEUR will be heavily traded in the build up. The most likely pair of decisions would be no QE in the UK but LTRO (long-term refinancing operations or QE) in the Eurozone with both suggesting next month as the date for restarting easing and cutting interest rates respectively.

Non-farm payrolls in the US this Friday are expected to show a modest increase in the number of jobs the US economy created over the past month. It may turn out to be far to optimistic, given the employment index hit a 2 year low and taking historical correlations into account is suggesting a number closer to 0. If we do get a low figure pressure will be back on the Fed.