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IMS FX DAILY MORNING REPORT - 11th January 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.5526
POUNDS TO EUROS 1.2017
POUNDS TO AUSTRALIAN DOLLARS 1.5797

EUROS TO US DOLLARS 1.2919
EUROS TO POUNDS 0.8321
EUROS TO AUSTRALIAN DOLLARS 1.3144

POUND HEADLINES:

• It is another light day for economic data, with only a few second tier surveys due for release. Following the overnight publication of the UK BRC retail sales monitor, and the latest quarterly report from the BCC, early attention in the sterling markets will be on digesting prospects for consumer spending and the wider economy in light of these reports.
• As David Cameron noted over the weekend, the Bank of England faces a difficult judgement as it weighs up rising short-term inflation against leading indicators of growth, which remain mixed at best.
• Last weeks drop in the services PMI below the key 50 level, and yesterday's 1.3% drop in the Halifax house price index - the largest fall in three months - provide an early hint that the economy may be starting to cool.
• Pound/Euro interbank rate currently trading just above 1.20s. Key levels today are the 1.2050 benchmark. If the pound can break above this we feel we could see pound/euro hitting 1.2200. GBPEUR 1.2070 resistance level will be key as this will be the sell off point if breaks through benchmark rate.

EURO HEADLINES:

• The euro rebounded off a four month low but still remained under pressure. It was mentioned by Reuters that an unnamed but senior Eurozone official suggested that Germany and France among others have been pressuring Portugal to seek financial assistance from the EU and IMF before the governments funding situation grows worse.
• The single currency is under pressure in the days ahead as Spain, Portugal and Italy are scheduled to tap the debt market this week.
• The interest rate Portugal must pay to borrow funds hit a fresh high on Monday, as speculation mounted it would join Greece and the Irish Republic in needing an international bail-out. The yield on 10-year Portuguese government bonds rose for the fourth consecutive day, hitting 7.16%. The country's borrowing costs have surged as investors worried over its financial health.

US DOLLAR HEADLINES:

• Fairly listless trading conditions yesterday were repeated in Asia overnight, with absence of data or events keeping the dollar index within touching distance of 81.444, the November 30th high.
• The dollar had a mixed trading session as it hit a four month high against the euro before retreating slightly.
• There was a lack of any notable economic data for Monday: but there was interesting Fed commentary. The Feds Lockhart noted that seemed to echo Bernanke and support his belief in maintaining the stimulus program. In addition to which was Janet Yellen's suggestion that it may take 7 years to get the Fed balance sheet back to normal.

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