US: Fed Chairman Bernanke emphasised that the Fed’s QE programmes were ‘by no means on a preset course’, as a decision to reduce the pace of purchases would depend on the labour market, inflation, and whether financial conditions remain sufficiently accommodative. Although incoming data suggest that GDP growth was weak in Q2, an ongoing labour market recovery should help the economy to regain traction in coming months, and keep the Fed set for a September tapering.
Eurozone: The ECB announced changes to its risk control framework, which in general will lead to a decrease in haircuts applied for securities eligible in its monetary policy operations, in particular for asset-backed securities (ABS). It also noted that it continues looking for ways to improve funding conditions for small and medium-sized enterprises (SME), mentioning a possible acceptance of SME-backed ABS loans.
EUR/GBP: The BoE July meeting minutes showed that the MPC favours more detailed forward guidance over more asset purchases to steer policy expectations and stimulate the economy. As a result of reduced expectations of further QE, the pound strengthened slightly during the week.