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IMS FX DAILY MORNING REPORT - Wednesday 2nd February 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.6227
POUNDS TO EUROS 1.1726
POUNDS TO AUSTRALIAN DOLLARS 1.6044

EUROS TO US DOLLARS 1.3838
EUROS TO POUNDS 0.8527
EUROS TO AUSTRALIAN DOLLARS 1.3684

POUND HEADLINES:

• Today we have the construction PMI survey. December's activity index dropped below the breakeven '50' level to 49.1 for the first time since February 2010. January's survey should provide a gauge of the weather impact. This in turn may provide something of a precursor for tomorrow's more significant services PMI survey.
• You cannot argue with the strong January manufacturing PMI but the disparity with very weak December mortgage lending and M4 money supply data (snow related?) puts the UK economy on two different tracks but is a conundrum that will test the MPC's patience.
• UK manufacturing in January expanded at its fastest pace since records began in 1992. Employment in the manufacturing sector also rose at the fastest pace since the records began.

EURO HEADLINES:

• Speculation surrounding an enhanced EFSF is inevitably getting positive traction in EU periphery debt and EUR crosses and though one could argue that on this basis EUR/USD should be trading closer to 1.40.
• Unemployment in the eurozone remained at 10% in December, unchanged from the month before. The figure for the European Union as a whole also remained unchanged from November at 9.6%.
• Yesterday sterling reached up to 1.1750 early trading and closed the day virtually unchanged. This morning pound/euro continues to hover around 1.17.

US DOLLAR HEADLINES:

• Today's economic calendar provides something of a breather in an otherwise busy week. Top of the slate will be the US ADP employment survey. This is often characterised as the least worst indicator of US non-farm payrolls. Last month, the ADP struggles to live up to even this description.
• Yesterday's ISM recorded a sharp rise in the employment index to 61.7. Tomorrow's non-manufacturing index, which is more important as it covers a larger workforce, has been more subdued than its manufacturing counterpart.
• US factory output increased at its fastest pace in seven years last month. It was the 18th month in a row that the sector has shown expansion. The latest reading is the highest since May 2004.

If you need to buy, sell or make an international payment today then please call me for a free quote.

Kris Charalambides

FX Broker

kris@imsfx.co.uk

www.imsfx.co.uk

Tel: 0207 183 2790