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IMS FX MORNING REPORT for Monday 20th December 2010

Today's Interbank rates -

POUNDS TO US DOLLARS 1.5542
POUNDS TO EUROS 1.1821
POUNDS TO AUSTRALIAN DOLLARS 1.5700

EUROS TO US DOLLARS 1.3342
EUROS TO POUNDS 0.8456
EUROS TO AUSTRALIAN DOLLARS 1.3284

POUND HEADLINES:

• The CBI has downgraded its forecast for UK economic growth in the first quarter of 2011. The employers group expects growth of 0.2%, down from 0.3%, as public sector job losses and higher-than-expected inflation slow the economic recovery.
• The CBI also expects the Bank of England to start raising interest rates from the spring of next year. However, it does not see the UK falling back into recession, and predicts second quarter 2011 growth of 0.4%.
• Mortgage lending fell 5% in November compared with the previous month and was 10% down on a year ago, lenders say. Gross mortgage lending stood at an estimated £11.1bn - the lowest figure since April, the Council of Mortgage Lenders (CML) said.

EURO HEADLINES:

• The European Central Bank has expressed concerns that the Irish Republics 85bn euro bail-out package could affect its ability to provide further support to eurozone members. On Friday, credit rating agency Moody's cut sharply the Republics debt rating.
• November German PPI data are forecast to show a fourth successive rise in the annual rate, with a reading of 4.6% marking a two-year high. The upward pressure largely reflects external factors, with import prices (dueout on Wednesday) rising at around twice that pace, buoyed buy higher energy prices and the softer euro.
• In trading this morning, the ongoing concerns of credit downgrades and concerns from ECB president Trichet are serving as catalysts to keep the single currency pressured.
  

US DOLLAR HEADLINES:

• The pound briefly fell to a three-month low against a broadly stronger US dollar at the end of last week following an announcement from Lloyds TSB.
• Adding to dollars strength, the market remained concerned that the ECB has not done enough to prevent the eurozone crisis spreading.
• It is expected that the dollar positive environment will remain the dominant theme in this Christmas week with a potential drop in euro/dollar likely to drag this pair lower.

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Kris Charalambides

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kris@imsfx.co.uk

www.imsfx.co.uk

Tel: 0207 183 2790