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IMS FX DAILY MORNING REPORT - Thursday 20th January 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.5988
POUNDS TO EUROS 1.1855
POUNDS TO AUSTRALIAN DOLLARS 1.6060

EUROS TO US DOLLARS 1.3486
EUROS TO POUNDS 0.8435
EUROS TO AUSTRALIAN DOLLARS 1.3546

POUND HEADLINES:

• GBP/USD has failed to hold gains above 1.60 thus far, and Friday's retail sales data will probably be the next potential market moving event. We still see next weeks Q4 GDP and MPC minutes as key, but we continue to believe that the majority of the MPC are prepared to look through the recent increase in inflation. This should mean that UK yields ease from their current highs and bring down sterling with them.
• Following the wave of Chinese economic data released overnight, today sees the focus of attention turn mainly to the UK and US, the latest CBI quarterly trends survey is released.
• UK unemployment rose by 49,000 to almost 2.5 million in the three months to the end of November, the ONS revealed yesterday. Most analysts as well as the government, expect the unemployment total to continue rising, in large part due to the spending cuts designed to cut the budget deficit.

EURO HEADLINES:

• Plenty of rumours and counter-rumours about plans to effectively restructure Greek debt failed to have much impact on the Euro, but the underlying positive tone remained. While the market is sceptical that there will be any near term solution which will restore confidence in the periphery, the rumours do suggest that the EU is at least addressing the issues.
• There is unlikely to be any major development today though the 12:15PM Van Rompuy press conference will be focus.
• In the eurozone, today's data calendar is more limited with the exception of December German producer prices.

US DOLLAR HEADLINES:

• The dollar recovered overnight, helped by the weaker equity market, having been soft since US yields topped up, while talk of increased diversification from China and others has also weighed.
• The release of US housing market data continues today with December existing home sales. If anything, these have staged a modest recovery since the decline following the expiry of the homebuyers' tax credit last year.
• Other US economic data scheduled for today include initial jobless claims where we look for a fall of 10k to a level of 435k, along with January's Philadelphia Fed Survey.

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