Onto Italian Auctions & BoE, ECB Decisions

Bank of England QE expected to remain unchanged, ECB rates seen unchanged, Spanish and Italian bond auctions due, China CPI eases further prompting easing speculation. The latest tactical trades on CHF and the current positioning in USD/CAD and CAD/JPY are linked below.

Todays Bank of England meeting isnt expected to offer much in the way of surprises considering the recent upside data surprises. Todays release of industrial and manufacturing production figures for November may not paint a particularly bright picture but it has been well flagged up that the MPC wont pre-commit to further easing until they see the Q4 GDP numbers later this month.

Industrial production is expected to slip 2.2% annually, but improve from Octobers 0.7% slide to post a figure of -0.1%.

Manufacturing production is also expected to similarly improve on the monthly measure from -0.7% in October to -0.2%, while the annualised measure is expected to slide from positive to negative territory of -0.5%.

Todays European Central Bank decision will likely assess the need for further easing in the wake of two successive rate cuts as well as the launch of last months unprecedented three year Long Term Refinancing Operation (LTRO). While the ECB is likely to stand pat today, it could provide hints about the timing of any further policy action, as well as the downgrading of growth forecasts in the wake of the latest economic data.

Yesterdays solid demand for Germanys 5 year bund is unlikely to translate across to today's Italian and Spanish bond auctions which will be closely monitored for evidence of lower yields and increased demand. Spain is looking to sell 5bn of 2015 and 2016 bonds while Italy is looking to sell 12bn of bonds.

Last night's Chinese December CPI slipped back to 4.1% y/y from Novembers 4.2% y/y, suggesting that the Chinese central bank may ease policy further in the coming days and weeks. Markets may interpret slowing China inflation as a positive because it allows the PBOC to ease policy further and respond to the deepening slowdown to Europe --China's biggest export market.