Daily Insight

The European Commission is "optimistic" about the state of the Euro economy according to comments from Jean-Claude Trichet yesterday. He also stated that European interest rates are at the "right level", but expressed some concern about inflation. Higher energy costs are driving inflation, and this increases the possibility that the ECB will raise rates to keep inflation in check.

Sterling also received a boost yesterday when two members of the Monetary Policy Committee also made comments skewed towards inflationary fears. After building speculation that we would see a rate cut in November or December, the two members expressed concern over high oil prices. Walton indicated that the MPC was now more united in its outlook than when they voted 5-4 for a cut in August. This suggests that November will be a "no change" vote. Sterling reacted strongly, driving up through 1.4600 Vs the Euro, reaching a high of 1.4655 but settling back to close a couple of ticks below the big level. We all know by now that 1.4600 is major resistance!

GBP EUR - Support 1.4600 (if we're trading above!) then 1.4500
Resistance 1.4655 then 1.4700
GBP USD - Support 1.7500 then 1.7445
Resistance 1.7575 then 1.7635
DATA: US Retail Sales (13:30) - We're expecting a 0.4% rise for September
US Industrial Production (14:15) - A 0.2% fall is expected. More important is capacity utilization, which should be 79.6%. A higher figure will be inflationary>>>bullish for the dollar.