Daily Insight

Analysts are now unanimous in their view that UK rates will remain on hold until at least February, when some believe the BOE will cut by a quarter point. Median estimates put the rate at 4.0% at the end of 2006, against the current 4.5%. This implies relatively flat rates going forward.

The Fed raised US rates by a quarter yesterday, now at 4%, the highest level since mid 2001. The dollar's reaction was non-existant, as this move was already widely priced into the markets. More important than the move itself, was the accompanying statement which maintained the "measured pace" phrase which implies further rate hikes ahead.

Some analysts are now worrying that continued rate increases with a strong emphasis on controlling inflation is actually providing a misleading outlook on the US economy, which could suffer a downturn if the removal of "monetary accommodation" (low interest rates) continues at the current pace.

US investors will be watching the ISM figures closely on Thursday for further clues on the economy.

GBP EUR - Support 1.4645 then 1.4600
Resistance 1.4700, 1.4720 then 1.4775

GBP USD - Support 1.7605 then 1.7575
Resistance 1.7680 then 1.7725

DATA: German unemplyment was down 90,000 from last month, but up 344,000 from a year earlier, the unemployemtn rate now running at 11%