What to watch

After the fireworks of yesterday where the ECB talked up a new fragmentation tool and flexibility of the PEPP and the Fed delivered the 75bp hike that had been telegraphed through the press on Monday, we now turn to the SNB and the BOE to set the tone today.

• The SNB is expected to see rates unchanged but to signal a September hike. And language on the currency could be the first sign that negative rates will be reversed. The SNB policy decision will be announced at 8:30BST / 9:30CET and the MNI preview is available here.
• For the Bank of England, markets ended yesterday pricing in around a 40% probability of a 50bp hike today (but 25bp fully priced). The sell-side consensus unanimously looks for a 25bp hike with none of the 21 previews that we have read looking for more than 3 MPC members voting for 50bp in their base case (although some do acknowledge the risk of a 50bp move today). If we see a 25bp hike today, the focus will be on whether the forward guidance remains in its current form or is altered in any way. As of yesterday's close, markets were pricing 83bp of hikes by August (cumulatively), 125bp by September (3 meetings) and 163bp by November (4 meetings). Whether the BOE attempts to use its statement to talk down these rate expectations remains to be seen. The market thinks the BOE will be influenced by the more aggressive moves by the Fed (and potentially by the ECB) but we are not sure that MPC members themselves believe that to be the case yet given that the BOE started hiking before many of the others. For the full MNI BOE preview click here.