Today's Interbank rates -
POUNDS TO US DOLLARS 1.6198
POUNDS TO EUROS 1.1946
POUNDS TO AUSTRALIAN DOLLARS 1.6031
EUROS TO US DOLLARS 1.3558
EUROS TO POUNDS 0.8370
EUROS TO AUSTRALIAN DOLLARS 1.3419
POUND HEADLINES:
- Bank of England monetary policy committee member Andrew Sentance has put further pressure on colleagues over high UK inflation in a speech. He questioned claims that unemployment and spare capacity in the UK economy would slow down price rises, which he instead blamed on strong global demand. Mr Sentance has been voting for an interest rate rise since June.
- UK retail sales rebounded in January after heavy snow caused a big drop in December sales, latest figures have shown. The volume of retail sales in January rose 1.9% on the previous month. Decembers monthly figure was also revised downwards to show a 1.4% monthly drop - the biggest December fall since records began.
- UK mortgage lending fell by 13% in January compared with December to the lowest level for a year at £9.2bn, lenders have said this morning. The mortgage market is likely to remain constrained in the coming months reflecting the sluggish state of the UK economy as a whole, as well as lack of demand.
- The Pound rose yesterday, following Andrew Sentance's bullish comments on interest rates. In trading this morning sterling is continuing to stretch its rally following strong Retail sales data bringing the price back above 1.19.
- Reminding us that inflationary pressures are not just a UK phenomena, German PPI for January is expected to show a rise of 0.7% from the previous month, taking the annual increase to 5.2%.
- The ECB will be keeping a close eye to ensure that such increases do not lead to an entrenchment of increased wage expectations, driving consumer prices higher. CPI inflation in the 17 nation eurozone
reached 2.4% year-on-year in January, while German reached 2.0%, both above the ECB's target of just under 2.0%. - Germany has warned that the eurozone's future bail-out fund must not become a "regional development fund", despite Europe's widely diverging economies. Next month the EU plans to finalise the rules for the new permanent fund - the European stability Mechanism (ESM).
- Spain's auctions were marginally disappointing yesterday, raising a little less than expected, but Portugal was an even bigger underperformer as rumours circulated that they were being pressured to accept a bailout. The big rise in the use of the ECB's marginal lending facility was also apparently EUR negative, but EUR weakness was very selective, only really showing up against the CHF.
- US prices rose 0.4% in January compared with the previous month, mostly due to rising food and fuel prices. The rate of change was the same as seen in December.
- The USD was soft through yesterday's trading in spite of the strongest Philadelphia Fed survey since 2004, and the apparent increase in geopolitical concern apparent in declining yields in the US and elsewhere.
- The USD for the moment appears to have lost its safe haven status, with the CHF and NOK seemingly the best performers on risk negative news, and even the AUD performing well yesterday.
Kris Charalambides
FX Brokerwww.imsfx.co.uk
Tel: 0207 183 2790
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