MidSession Review: Steroids side effects start to emerge.

In a day when policy decisions by three central banks are awaited the currency market will be used as a lighthouse.

The ECB, the Bank of England and the Bank of Japan hold policy meeting today, just after the Reserve Bank of Australia unexpectedly cut  interest rates on Oct 2.

The euro gained 0.4% to 101.72 yen,  the dollar traded at 78.60 yen, up from 78.53 yen in late North American trading Wednesday. The euro traded at $1.2943 or 0.2945% higher while the British pound reached 1.6107$ from $1.6075.

The British pound reacted to Bank of England officials vote to complete their latest round of stimulus amid intensifying dissent on inflation risks that threatens to cause a rift on future aid for the economy.

Governor Mervyn King's nine-member Monetary Policy Committee left the bond-purchase target at 375 billion pounds, as forecast by all 40 economists in a Bloomberg News survey. By next month's meeting, they'll have finished spending the 50 billion-pound round they started in July, forcing a decision on whether more stimulus is needed.

It's quite important to highlight what the policy maker Ben Broadbent said: the BOE's capacity to add to quantitative easing is limited by faster than expected inflation. These words support our hypothesis that Steroids' side effects are starting to emerge limiting Central Banks' power, can you imagine what can happen when a drug abuser cannot receive his steroids?

Bank of England policy makers left key interest rate a record low of 0.5 percent. Gilts were little changed, with the 10-year yield at 1.69 percent. It fell to the lowest in more than three weeks yesterday as investors sought the relative safety of U.K. debt amid the euro-area turmoil.

European turmoil temperature is measured by Spanish government bonds, which stayed lower after the nation sold 3.99 billion euros of securities. It auctioned 3.75 percent notes maturing in 2015 at an average yield of 3.956 percent, up from 3.845 percent at the last sale on Sept. 20. It also sold notes maturing in 2014 at 3.282 percent and 2017 securities at 4.766 percent. The nation's three-year note yields rose eight basis points to 4 percent, while the rate on the two-year security was 12 basis points higher at 3.34 percent. Investors bid for twice the amount on offer for the three-year bonds in the Spanish auction, reflecting high expectations of ECB support.

On the equity side:

The Stoxx50 fell 0.09% to 2,490.28, the German Dax fell 0.06% to 7,317.99, in Southern Europe Italian Ftsemib fell 0.10% to 15,519.65, the Spanish Ibex led losers down trading 0.21% lower to 7,810.50. The benchmark picture show us that traders are waiting for Draghi to step on the stage. In the mean time, the ECB kept rates at record low 0.75% as expected.

Commodity wise, Gold rose 0.63% to 1,791.10$ an ounce. Monetary-policy easing over the past few months has acted as a support for gold as investors view it as the ultimate store of value. Gold strengthens when investors fear inflation and currency weakening. Crude Oil futures rose 0.67% to 88.73$ a barrel on Globex. The moves follow a $3.75, or 4.1%, plunge overnight.

In US: Initial jobless claims are expected to increase to 370,000 last week, from 359,000 in the previous period. Another release may show factory orders declined 5.9 percent in August, after increasing 2.8 percent a month earlier, according to economists surveyed by Bloomberg.

It's time to get ready for Mr Draghi. Remember to trade your plan not your emotions.

Originally posted at www.77sigmatrading.com