Market Report

Many analysts are starting to re-evaluate their opinion of the dollar for the next six months. With US durable goods orders falling the most in three years, new home sales are down by the most in 13 years and the government lowering its estimates for fourth quarter economic growth. Its no wonder that analysts are changing their forecasts of Euro Dollar being 1.33 in 6 months time to now thinking it will be 1.35.

It seems likely that interest rates in the Eurozone will be increased again, as inflation is up and the manufacturing sector expanded by less than expected.

Today sees the Eurozone PPI for January, the Fed chairmans Mr. Poole is speaking at 12:00 and we have the often important University of Michigan confidence at 15:00.

DE

The pound may continue its slide against the Euro today as signs inflation in the U.K is slowing. The Bank of England seems certain to lag behind the European Central Bank this year in raising interest making the Euro a more attractive currency to hold.

The Dollar still remains a little weak today against both Sterling and the Euro after yet more disappointing housing figures from the states. The former Federal Reserve Chairman Alan Greenspan has not helped the Dollars plight by suggesting there may be a recession in the U.S before the end of the year.

VC

The pound is set for it's biggest drop this month in almost a year against the Euro on expectations the European Central Bank will outpace the Bank of England in raising interest rates, making the U.K. currency less attractive to hold.

Britain's pound has slid 1.6 percent versus the common currency as investors scaled back expectations for interest-rate increases by the Bank of England after inflation unexpectedly slowed. The BOE will lift rates once again this year, while the ECB will probably lift them twice more.

Yesterday's huge sell off on the global stock markets triggered by fears of a weakening Chinese economy saw the USD benefit slightly against local currencies but gains were negated by data release from the U.S. with higher gas prices reported plus expected housing activity to deteriorate in 2007.

South Africa's rand fell with other commodity-based currencies and on speculation a proposed ``windfall tax'' on the country's commodity companies may lead to foreign investors withdrawing from its stock market.

VC

The pound may drop against the Euro after Bank of England official David Blanchflower said the bank expects the U.K. currency to decline in the next couple of years as inflation slows.

The British currency has slid 2 percent from a four-year high versus the euro reached Jan. 23 as signs of slower-than- anticipated inflation stoked expectations Bank of England interest rates are near their peak. The BOE will lift rates once again this year, while the European Central Bank will probably lift them twice more, according to futures trading.

European finance ministers said they are optimistic about the inflation outlook for the 13-nation Euro region, suggesting they see limited scope for further interest-rate increases beyond the two expected this year.

The United States sees the release of the Consumer Confidence data at 15.00 GMT which seems likely to show a decline, with a sluggish job market and higher gas prices putting a dampener on the feel good factor in the U.S.

DH

Good Morning,
The most noteworthy development since late Friday has been on the geo-political front with concerns surrounding Iran and potential strikes by the U.S.An article by Seymour Hersh suggesting accelerating U.S. preparations for an attack on Iran followed on from Vice President Cheney's hint on Friday in reference to an imminent strike on Iran. The resulting effect has seen the USD weaken marginally over the w/e across the board most notably against the Chf franc.

In the U.K the data calendar is light this week with the main focus being tomorrow's Mortgage approvals and Wednesday's Nationwide house price survey. David Smith in his regular Sunday Times article published the w/e expressed that the strength of GBP on the foreign exchanges cannot be sustained due to the widening of the UK's trade deficit. This has had limited impact on the GBP rate thus far due to the weakened opening of the USD.

Have a good week.

GR

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