Market Report

The Bank of England believe that inflation is under control, and could even fall below the target for this year. This would in most circumstances indicate that further interest rate hikes.

The dollar did not see much activity yesterday, with some bad weekly jobless figures released. The dollar was effected by rumours that the terror threat level was raised, and the nervousness surrounding Irans nuclear enrichment program.

There is very little in the way of economic data being released today, the highlights being the German IFO survey of economic sentiment and speeches by regional FED presidents.

Have a good weekend.

DE

Good morning today is very light on market data release with the exception of the jobless claims from the United States at 13.30 GMT. We expect to see a further decline in Sterling strength against the Dollar as inflation in the U.K seems to have been brought back into line after the rate hike in January.

Growing concerns in the United States over the risk of inflation may have put the brakes on any further interest rate cuts in the near future. The dollar also benefited as a Labour Department report may show the number of Americans claiming state unemployment benefits for the first time fell to 325,000 last week from 357,000 the week before, according to a survey.

DH

Sterling slightly moved up from the previous day's six-week low against a basket of currencies yesterday, supported by robust data from the housing market and as people adjusted positions ahead of Bank of England minutes. Data released yesterday showed that British mortgage lending rose strongly again in January, building society mortgage approvals hit a record high and money supply growth picked up. Coming after a run of relatively soft housing market data, these numbers have caused slight concern and have started speculation for another BoE rate hike in coming months.

The next insight into the bank's thinking will come on today as the minutes of the Bank of England's last policy meeting are released at 0.930. Out of the nine policymakers, seven are expected to have voted to hold rates at 5.25 percent this month, the other two to have favoured following up January's surprise rate hike with another move. Should we see the voted come out at 6-3 this will provide some support for GBP.

Also today at 11:00, the CBI Industrial Trends Survey is released. In last months survey, the quarterly balance that measures output expectations picked up sharply. Finally, at 19:00, Bank of England Chief Economist Charles Bean is scheduled to speak at a corporate business dinner in Huddersfield

On Monday, sterling sold off sharply after the BoE said some depreciation of the real exchange rate would probably be necessary to balance Britain's current account. However this seemed to be exaggerated move, with volumes thinned by market holidays in the United States and much of Asia.

In the US, the core CPI due out at 1.30pm is expected to rise. While the forecast is for another month of weakness in vehicle prices, the shelter components of core CPI should continue to post solid gains. Both we and the consensus expect the headline CPI to rise 0.1% m/m in January after a 0.4% m/m increase in December.

Over night the Bank of Japan has moved their interest rates to 0.50% with a decisions vote of 8-1 and the government stating that they are willing the let the rate hikes take there course.

Interview published by Swiss Newspaper Finanz and Wirtschaft stated that Swiss National Bank chairman J-P Roth thinks that Interest rates in Switzerland are not high enough yet to secure price stability.

Down under a statement released by Glenn Stevens from the Reserve Bank of Australia has indicated that interest rate are more likely to be hiked than cut, this is after wage price inflation.

DH

Sterling hit six-week low against the Euro and dropped sharply against the dollar yesterday after the Bank of England said some depreciation of the real exchange rate would probably be necessary.

Sterling had been pressured slightly earlier after figures released by UK property website Rightmove showed asking prices for homes in Britain rose an annual 11.5 percent this month, the weakest reading in four months. February's annual rate compared with a 13.5 percent rate in January and was the lowest since last October, signalling interest rate rises were starting to bite on the housing market.

The major piece of data for GBP this week, will be on the minutes released tomorrow from the Bank of England regarding there last decision to keep interest rates unchanged.

At 9:30 today, the British Bankers' Association and Building Societies Association are due to release preliminary mortgage lending and consumer credit figures for January. Other than this another quiet day with regards to economic data today, it is seemingly the calm before the storm, given the heavy calendar for tomorrow across the globe.

Have a good day!

DH

Good Morning. Sterling has failed to recover from its fall against the USD and Euro and opportunities for the pound to make any gains appear to be limited this week with only the release of the Bank of England's Minutes from their February meeting on Wednesday due out.

With today being President's Day in the U.S. the overnight markets have been quiet with the main mover being the Yen. The latter fell from its six week high against the USD after Japanese government ministers including PM Shinzo Abe saying that the Bank of Japan should make an "appropriate" decision on interest rates this coming Wednesday.

The other notable mover is the South African Rand which advanced to a six-week high against the USD as the price of gold and platinum rise thereby boosting demand for the currency.

Have a good day.

GR

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