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IMS FX DAILY MORNING REPORT - Thursday 27th January 2011

Today's Interbank rates -

POUNDS TO US DOLLARS 1.5890
POUNDS TO EUROS 1.1609
POUNDS TO AUSTRALIAN DOLLARS 1.6021

EUROS TO US DOLLARS 1.3687
EUROS TO POUNDS 0.8612
EUROS TO AUSTRALIAN DOLLARS 1.3798

POUND HEADLINES:

• The MPC minutes brought temporary relief in GBP/G10 but the downside growth risks may well be highlighted again this morning when the CBI distributive trends survey for January is released. This is the first release of Q1 and so any evidence that retail turnover and placed orders are drifting down may bring sterling sellers back into the fold.
• Yesterdays MPC minutes revealed that Bank of England policymaker Martin Weale has joined Andrew Sentance in voting for an interest rate hike. For most members the risks to inflation "in the medium term had probably shifted upwards," the minutes said. This was before Tuesday's shock news that GDP growth has contracted and a warning that inflation could hit 5%.
• The number of mortgages approved for house buyers by the UK's main banks fell by 10% in 2010. The BBA says its members approved just 400,000 mortgages between them. That meant the number of approvals was at its lowest level in 11 years, apart from 2008.

EURO HEADLINES:

• Eurozone survey data have remained buoyant in recent months, both at a business and consumer level. It is expected a slight improvement in today's releases of economic, industrial and services confidence for January.
• The preliminary estimate of German harmonised CPI could steal the limelight however, with the annual rate predicted to breach 2% in January for the first time since October 2008
• Euro area CPI hit 2.2% in December - also a two-year high. The ECB's Bini-Smaghi and Tumpel-Gugerell will take to the stage today.

US DOLLAR HEADLINES:

• The dollar index and risk assets continued to move in opposite direction overnight. The Feds decision to leave policy unchanged and frame the economy in a slightly more upbeat context added some momentum to the sell USD/buy risk trade, though risk (currencies) right now appear to stretch only as far as SEK and NOK.
• Today's December US durable goods orders data will provide an important final piece of the jigsaw as markets look ahead to advance US Q4 GDP on Friday.
• The Fed yesterday again highlighted its concerns about the elevated level of unemployment. Positively, the housing market also looks to be on an improving trend, albeit from a very low base. Pending home sales have risen at a strong pace in recent months and we look for another solid rise in December based on improving general confidence.

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