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IMS FX DAILY MORNING REPORT - Thursday 13th January 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.5757
POUNDS TO EUROS 1.1975
POUNDS TO AUSTRALIAN DOLLARS 1.5808

EUROS TO US DOLLARS 1.3158
EUROS TO POUNDS 0.8350
EUROS TO AUSTRALIAN DOLLARS 1.3200

POUND HEADLINES:

• Today we have the Bank of England interest rate decision although it is expected that the Bank rate and APF target will remain unchanged.
• Central bank meetings dominate the outlook for today. From the MPC's perspective, the latest set of minutes saw the Committee warn that risks to inflation had 'probably shifted upwards', an observation that has sent shock waves through short-dated interest rates. Whilst the risks are acknowledged posed by inflation, It is expected it would take a significant second-round inflation effect over the coming months to encourage the MPC to tighten policy .
• Novembers industrial activity is released ahead of this announcement. It is expected another buoyant month for manufacturing (up 0.6% on the month, consensus 0.4%) based on strong survey evidence. However, disappointing oil export data yesterday pose some downside risks to the forecast of a 1.0% gain in industrial output (consensus 0.5%).

EURO HEADLINES:

• It was quite a smooth takedown of two Portuguese auctions calmed nerves yesterday, with China admittedly playing a increasingly significant influence.
• Spain and Italy are two of the PIGS tapping the market today.
• The ECB will provide more of a market focus today. This reflects no greater likelihood of policy change, but simply a keen attention on Eurozone developments, particularly in the light of Spanish and Italian debt auctions this morning, and the opportunity the ECB press conference provides for further updates.

US DOLLAR HEADLINES:

• The USD has been a sideshow this week to commodities and China/EU bond supply and it is not expected to change meaningfully over the next 48 hours.
• PPI, initial claims and foreign trade due today followed by Bernanke's speech on small business lending.
• Sterling rose yesterday against the dollar to a one month high following positive sentiment after the Portuguese bond auction and speculation over the timing of an interest rate rise in the UK.

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