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IMS FX DAILY MORNING REPORT - Friday 17th January 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.5844
POUNDS TO EUROS 1.1956
POUNDS TO AUSTRALIAN DOLLARS 1.6017

EUROS TO US DOLLARS 1.3252
EUROS TO POUNDS 0.8363
EUROS TO AUSTRALIAN DOLLARS 1.3396

POUND HEADLINES:

• House prices have dropped in 5 of the past 7 months according to Rightmove so it us no surprise that GBP didn't show great interest in the paltry January gain reported overnight.
• A big week ahead for UK data with the opportunity perhaps of stronger CPI tomorrow worth selling into ahead of expected disappointing labour market and retail sales stats later in the week.
• Although the Bank of England decided to keep policy unchanged last week, we will have to wait for the MPC meeting minutes (due next week) to see how close the decision was. The minutes of the December MPC meeting included a forewarning that CPI inflation could well reach 4% by the spring and that for most members of the Committee the balance of risks to inflation had shifted upwards.

EURO HEADLINES:

• Technically, the market remains short EUR and as the 2-day EU Ecofin meeting gets underway and Germany reiterates its opposition to any expanded EFSF, we think the single currency could rapidly see ECB induced gains evaporate.
• The Economist newspaper has no reputation for causing tremors but its call for a debt restructuring in Friday's edition will not go unnoticed in EU political circles at the IMF prepares undertakes a 'routine' mission to Spain.
• Rising fuel prices helped push annual eurozone inflation up to 2.2% in December, from 1.9% in November. On Thursday last week, the ECB left interest rates unchanged for the 20th month in a row at its monthly meeting.

US DOLLAR HEADLINES:

• A painful week dragged the dollar index all the way down last week to the low point of the 7-week range and one must now ask the question whether a break of the 79.0 level is imminent.
• A relatively quiet week for US data is headed by key readings on the housing market, with new starts (Wednesday) and existing homes sales (Thursday) both due.
• US retails sales rose in December for the fifth consecutive month, driven by holiday season demand, official figures have suggested. Sales grew by 0.6% last month compared with November, according to the US Commerce Department.

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