Market Report

The pound rose against the Euro yesterday despite a slow down in UK inflation recorded in the Consumers Prices Index, the pounds strength was partially assisted by the stark comments made by Bank of England Governor Mervyn King whose remarks fundamentally indicate that their may yet be more rate rises.

The comment was aimed in part at the UK's current mortgage situation where consumers are heavily loaded with mortgages that are based on variable rate interest only payments as well as a host of mortgages due to move to variable rates after the fixed rate time has expired.

Although the pound did rise against the Euro, its strength was not overly reflective in trading against the US dollar which is still trading tight after Friday's sell off where lows of 1.9625 were seen.

The main focus of the day today for the UK, US and Eurozone will be the raft of data that focusing on Jobless Claims, Average Earnings, Retail Sales, Manufacturing Shipments for Canada, as well as The Eurozone Central Banker Trichet speaking over in Berlin.

All in all today could be quite an eventful day which as ever simply reaffirms the point that security is better than speculation when comes to the consumer markets needs for Foreign Exchange.

DD

Sterling eased yesterday against the dollar, recovering small losses seen last week after a surge in U.S. government bond yields boosted the greenback.

Mervyn King's speech last night to the Welsh CBI was short in length but long in interest to Bank of England watchers. The pound may advance after King signalled U.K. interest rates may have to rise further from a six-year high should inflation hold near its current levels.

On that note it will be all eyes down at 09.30 when we see released the Consumer Price Data for May. We expect this to rise taking the annual inflation rate down to 2.6%, which is still 0.6% above the Bank of England's 2 years time plan.

Trade data for April are also released at 9:30. We expect a small widening in the trade deficit to £7.2bn, from £7bn in March. The consensus expectation is for the trade deficit to remain at £7bn.

A quiet day ahead in the US with no data or speakers scheduled.

DH

The lack of data being released today means we can catch our breath after the Dollar strength we saw on Friday.

Last night the New Zealand Dollar dropped by 1% after selling by the Reserve Bank of New Zealand raised concerns about how much longer carry trades can carry on.

The highlight today is ECB President Trichet speaking on the subject of Economics and Monetary affairs. Despite there being little data today, later in the week we have CPI from the UK on Tuesday and retail sales on Thursday. We also have CPI from the US on Friday and Retail sales on Wednesday.

Despite being quiet, there is plenty to take advantage perhaps selling your Dollars here. Lets hope the England cricket team can take advantage today!

DE

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