Today's Interbank rates -
POUNDS TO US DOLLARS 1.6026
POUNDS TO EUROS 1.1851
POUNDS TO AUSTRALIAN DOLLARS 1.6070
EUROS TO US DOLLARS 1.3522
EUROS TO POUNDS 0.8437
EUROS TO AUSTRALIAN DOLLARS 1.3559
POUND HEADLINES:
- As expected the BOE left interest rates on hold after the MPC meeting. However, this is very unlikely to halt speculation about a near term hike in rates. The BOE's announcement didn't give us any fresh information on the relative probabilities that they would give to downside risks to growth compared with the upside risks to inflation.
- Attention will now focus upon next week's Quarterly Inflation Report to see what that reveals about these topics. Then the following week we will see the publication of the minutes for yesterday's meeting which will tell us which way the 9 members of the MPC voted and whether there was any increase in January's two votes for an immediate rate hike.
- UK Producer Price Index Input for January month-on-month comes in at 1.7% beating expectations of 1.4%. The year-on-year figure is 13.4% beating expectations of 12.7%. UK PPI output for January month-on-month came in at 1.0% beating expectations of 0.5%. The year-on-year figure comes in at 4.8% beating expectations of 4.4%.
- The Euro is experiencing a few distractions of its own, with the succession of Trichet at the ECB helm generating a great deal of debate whether the currency and euribor/bund curve should be priced according to perhaps less hawkish credentials of the potential candidate to Weber.
- Portugal has denied it will struggle to raise capital from international investors after yields on Portuguese government debt hit record highs. Earlier, the ECB intervened to buy Portugal's debt after yields rose sharply. The rise in yields renewed concerns Portugal may need financial assistance.
- German CPI for January month-on-month comes in at -0.4% modestly higher than forecasts of -0.5%. The year on-year figure is 2.0% higher than expectations of 1.9%
- Today we have the US trade balance for December which is expected to show yet another huge deficit on the month. The dollar has been showing some strength of late on the back of stronger economic numbers. However, this data will highlight the continued massive trade gap between the US and the rest of the world and in particular China.
- Just as interesting as the overall balance will be the relative performance of exports and imports. US exports have been growing strongly but there is a risk that the December figure will be hit by the cold weather. A weak figure for exports or a strong one for imports would also hint at the possibility that the initial strong GDP gain for 2010 Q4 might be revised downward. The rise in Oil prices provides a further potential upside risk to the trade numbers.
- US posts $49.8 billion budget deficit in January, smaller than $56.2 billion expected. Prior reading was -$42.6 billion.
Kris Charalambides
Tel: 0207 183 2790
The dollar has been showing some strength of late on the back of stronger economic numbers. Free PPI Claims
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