Daily Insight

The Dollar failed to make any gains against the majors yesterday, dropping 0.1% versus the Pound and remaining relatively unchanged against the Euro despite a particularly positive report on U.S consumer sentiment. The Conference Board measure of consumer confidence reached the highest level in nearly five years this month as increased spending was propelled by the strong expansion of the U.S labour market and rising personal income. The index rose to a reading of 110.3 in January, the highest level since May 2002, and it seems increasingly likely that consumer spending will continue to support economic growth in the wake of the biggest housing slump in 17-years. The is a host of significant economic data released this afternoon in the States with the advanced estimate of U.S gross domestic product taking centre stage and it is widely anticipated that the economy expanded 3.0% in the fourth quarter led by increased spending as fuel prices dropped and wages rose. The Dollar has managed to claw back the recent gains made against Sterling overnight as we fall back through the major support level at 1.9600 and without doubt the focus this evening will fall on the FOMC rate announcement. The Federal Reserve are widely expected to hold interest rates steady at 5.25% but the tone and language used in the accompanying statement will be heavily scrutinized for an insight into future policy.

The Pound rose modestly against both the Euro and the Dollar yesterday, firming an additional 0.1% by the close of trading last night following a report from Nationwide, which showed that UK house prices had advanced 0.3% in January. However, the projected rise in prices was under expectations and combined with the slight drop in mortgage approvals over the same period, there is evidence to suggest that growth in the UK housing market may of peaked. The Bank of England have raised interest rates by 75 basis points since last August and with house prices increasing by the smallest amount since May, it seems evermore likely that higher mortgage rates are beginning to weigh heavily on the housing market. The Pound has come under sustained pressure against the majors overnight and that trend may continue this morning as UK consumer confidence is expected to fall modestly in the figures for January.

The Euro managed to hold firm against the Dollar yesterday and has advanced against Sterling overnight despite a surprisingly negative report on European retail sales, which dropped for the first time in 10-months in January. The index fell to an annual rate of 47.9, the lowest since February last year following the introduction of the value-added tax increase, which is obviously beginning to weigh heavily on German consumer sentiment. However, the Euro has found some support this morning as a separate report showed that German unemployment fell to the lowest level in five years in January as the fastest economic growth since 2000 encouraged companies to step up hiring. The jobless rate fell to 9.5% from 9.8% in December, the lowest level since 2002, and the report will perhaps provide an insight into the European unemployment gauge later this morning, which is expected to remain unchanged at 7.6%. There is a host of significant data released in the Euro-zone this morning with the focus falling on the flash estimate consumer price index, which is expected to show that inflation rose above the ECB's 2.0% target, which may prompt further speculation of a rise in European interest rates.

Data Released 31st January

UK 10:00 Consumer Confidence (January)

EU 10:00 Flash CPI (January)

EU 10:00 Business Climate Index (January)

EU 10:00 EC Sentiment Index (January)

- Industrial / Consumer Confidence

EU 10:00 Unemployment Rate (December)

U.S 13:15 ADP Employment Report (January)

U.S 13:30 GDP - Advance (Q4)

- Deflator

U.S 15:00 Construction Spending (December)

U.S 15:00 Chicago PMI (January)

U.S 19:15 FOMC Rate Announcement

written by Adam Solomon

The Pound continued to slip against the Euro yesterday and remained relatively unchanged versus the Dollar despite a surprisingly positive report from Hometrack plc, which showed that UK house price inflation had reached the fastest pace in over three years in January. However, the Pound has rebounded sharply overnight as a separate gauge on the UK housing market showed that prices jumped higher than the anticipated 0.8% this month and that will only fuel speculation of a further rise in interest rates in March. Overnight, the Pound has bounced back above the significant support level at 1.9600 against the Dollar and that trend may continue this morning following a report on UK mortgage approvals, which are expected to remain at an elevated level for December.

The Euro managed to hold firm against the Dollar yesterday and made modest gains versus the Pound despite the apparent lack of any economic data released in the Euro-zone. That trend is set to continue this morning with the focus this week falling on the Flash estimate for consumer prices tomorrow, which may show inflation back above the ECB's 2.0% target as the introduction of the VAT increase in Germany takes effect. If the report comes out ahead of expectations then the possibility of further rise in European interest rates will look increasingly likely in March as policy makers continue to monitor developments to price stability. The single currency may also find support later this week with the release of the Purchasing Manager's index on European manufacturing, which together with the EC sentiment surveys are expected to show strong growth over the past month.

The Dollar managed to consolidate the recent gains made against both the Euro and the Pound yesterday ahead of a significant week in terms of economic data. Following a substantial rise in durable goods orders and new home sales last Friday, the positive sentiment surrounding the Dollar may continue this afternoon as U.S consumer confidence is expected to rise to the highest level in over four years this month. Following a well publicised slump in the U.S housing market and a slowdown in manufacturing, consumer confidence and retail sales have been one of the principle drivers of economic growth led by the buoyant expansion of the U.S labour market. The Conference Board's index may rise to the highest reading since May 2002 in January but that is not expected to prompt the Federal Reserve to raise U.S interest rates in their monthly announcement tomorrow.

Data Released 30th January

UK 09:30 Mortgage Approvals (December)

U.S 15:00 Consumer Confidence (January)

written by Adam Solomon

Following on from last week, the Dollar continued to rally against the majors, gaining a further 0.3% versus the Euro and dropping through the major support level at 1.9600 against the Pound following yet another band of positive economic data. A report from the Commerce department showed that the sales of new homes rose by more than anticipated in December, which will only further speculation of a rebound in the housing market following the biggest slump in more than 17-years. The significance of the report will rekindle concerns that the Federal Reserve have the capacity to raise U.S interest rates over the coming months after adopting a neutral stance earlier this month. Therefore, the focus this week will fall heavily on the FOMC rate announcement on Wednesday and although rates are expected to stay unchanged at 5.25%, the tone and language used in the accompanying statement will be heavily scrutinized. Elsewhere, the Dollar may continue to rise against the majors ahead of the monthly U.S job report this Friday as it is widely anticipated that the economy added 145,000 jobs to payrolls in January with unemployment unchanged at 4.5%.

Over the past week, the Euro managed to hold steady against the Pound after falling to a fresh four-year low on Tuesday but continued to decline against the Dollar following a distinct lack of economic data released in the Euro-zone. Although, the single currency failed to make any gains on Friday despite a report showing that money-supply growth into the Euro-region accelerated at the fastest pace in almost 17-years, which signals persistent inflation concerns that may force the ECB to continue raising interest rates. Therefore, the focus this week in terms of economic data will be the initial estimate for Euro-zone inflation, which is widely expected to rise back above the 2.0% target year-on-year in January as the VAT increase in Germany has a negative impact. As a result, the Euro may make some gains against the majors as the chances rise of a further rate increase in March.

The Pound rose to the highest level against the Dollar since September 1992 last week and also achieved a fresh four-high versus the Euro prior to a report from the Bank of England, which showed that the committee was split 5-4 in favour of raising interest rates in January. As a result of the indecision within the MPC, Sterling fell considerably against the Dollar as the chances of a back-to-back rate increase in February was scaled back although we still anticipate a further quarter-point rise in March. There is a distinct lack of economic data released in the UK this week with the focus falling on UK mortgage approvals tomorrow, which is expected to drop to 127,000 in December as the previous rate increases from the BoE take effect. However, Sterling has failed to make any gains this morning despite a report from Hometrack, which showed that UK house-price inflation reached the fastest pace in over three years this month. Prices in the London area specifically rose 0.8% from last month while growth in the rest of the country increased 0.3%.

Data Released 29th January

UK 11:00 CBI Distributive Trades Survey (January)

written by Adam Solomon

The Euro managed to make modest gains against the Dollar yesterday and remained unchanged versus the Pound despite of an unexpected fall in German business sentiment in January. The Ifo index was widely expected to increase to a record level for the second month in succession but confidence declined on concern that the value-added tax increase would harm consumer spending and therefore weigh on economic growth in Europe's largest economy. However, despite the minor drop in the sentiment index, a reading above 96 indicates growth and there is strong evidence that the German economy will continue to expand this year. As a result, the Euro managed to claw back some gains against the Dollar and the single currency may receive a further boost this morning as the 3 month moving average for M3 money supply into the Euro-zone is expected to increase to 9.1% from 8.8% in November.

The Pound managed to find some support yesterday after the volatile slide on Wednesday following the release of the minutes from the BoE's last policy meeting, which has seen interest rate expectations scale back from a projected rise in February. However, with inflation still running well above target, any economic reports that show a rise in wage growth or consumer prices will rekindle speculation that interest rates can rise again next month. At the close of trading last night, the Pound was 0.2% higher against the Dollar but overnight we have traded back towards the significant support level at 1.9600 and if breached, Sterling may fall all the way back towards 1.9465.

The Dollar came under a modest amount of pressure yesterday as a report on the U.S housing market came in slightly under expectations as the sales of existing homes declined for the first time in three months. The slump in the housing sector, which has heavily weighed on U.S economic growth, has showed signs of bottoming out in recent months but the report yesterday capped the biggest annual drop in sales since 1989. Sales dropped 0.8% on the month in December while falling 8.4% in 2006 after the Federal Reserve raised interest rates 17-times over a two year period. Elsewhere, a separate report from the labour department showed that the number of initial claims in the past week rose 36,000. However, the Dollar has managed to firm an additional 0.3% versus the Pound overnight and may make further gains today ahead of a report on the sales of new homes in the States. The report is expected to show that new home sales rose for a second consecutive month, which will only provide further evidence that the housing market is improving and contribute to economic growth in the second half of 2007.

Data Released 26th January

EU 09:00 M3 Money Supply
- 3 month moving average

U.S 13:30 Durable Goods Orders (December)

U.S 15:00 New Home Sales (December)

written by Adam Solomon

The Pound declined heavily against the majors yesterday, falling 0.8% versus the Dollar after a achieving a fresh 14-year high earlier in the week and we closed last night 0.3% lower against the Euro following a surprisingly dovish report from the Bank of England. The catalyst for the decline in Sterling began on Tuesday afternoon when the governor of the BoE, Mervyn King, publicly declared that UK inflation was expected to fall quite sharply in the second half of the year, which suggests that interest rates may peak around 5.5%. However, following the release of the minutes from the BoE's last policy meeting yesterday morning, the Pound fell heavily as the nine-strong committee voted 5-4 in favour of a rise in rates in January despite expectations of a unanimous decision. The so called dissenters maintained that there was insufficient evidence to warrant a rise in rates this month but with inflation running well above the 2.0% target, it seems likely that interest rates will need to rise further with the market anticipating a hike in March.

Elsewhere, The Pound failed to find support after a separate report showed that the UK economy expanded at the fastest pace in nearly three years in the fourth quarter of 2006 led by considerable growth in services and retail sales. The preliminary estimate for gross domestic product, the value of all goods and services, increased 2.9% from a year earlier, the fastest pace since 2004 as the economy expanded 0.8% from the third quarter. With the economy growing at a faster pace than anticipated and inflation well above target, it seems inevitable that the BoE will continue raising interest rates in the short-term and that should provide further support for the Pound despite yesterday's slide.

The Euro managed to claw back some modest gains against Sterling yesterday and remained largely unchanged versus the Dollar despite the apparent lack of any economic data released in the Euro-zone or the States. However, the single currency has come under a modest amount of pressure this morning as German consumer confidence fell to the lowest level in a year on concerns that higher taxes will reduce disposable income. The gauge of confidence in Europe's largest economy dropped to a reading 4.8 following a revised 8.5 in January despite the dramatic fall in unemployment, which currently stands at a four-year low. Nevertheless, the Euro may receive a timely boost later today as a report on German business confidence is expected to rise to a record level in January following a considerable drop in oil prices and the German stock index rising to a six-year high.

Over the past 24hrs, the Dollar has made significant gains against Sterling despite the distinct lack of fundamental data released this week. However, there is some key economic reports released this afternoon in the States with the focus falling on existing home sales, which may provide a further indication of a rebound in the housing market. The slump in the housing sector has been one of the main catalysts for a slowdown in economic growth in the States following the Federal Reserve's aggressive monetary tightening cycle over the past two years. The Dollar rose last week as a report on housing starts showed that builders had started work on more new homes than anticipated and if existing home sales rises above forecasts today, we can expect the Dollar to make further gains against the majors.

Data Released 25th January

GER 09:00 Ifo Index (January)

EU 10:00 Current Account Balance (November)

U.S 13:30 Initial Jobless Claims (w/e 20th January)

U.S 15:00 Existing Home Sales (December)

written by Adam Solomon

The Pound surged forward yesterday, rising to the highest level since September 1992 against the Dollar and rose to a fresh 4-year high versus the Euro following an industry report, which showed that UK factory-gate prices increased to a 12-year high in January. As a result, Sterling soared to the highest level against the majors since it was ejected from the European Exchange Rate Mechanism over 14-years ago. However, by the close of trading last night, the Pound had relinquished much of the earlier gains and fell significantly against the Dollar and the Euro overnight as we eagerly await the release of the minutes from the BoE's last policy meeting. The report is expected to show that the monetary policy committee voted unanimously to raise interest rates this month but the minutes should provide an insight into the chances of a further rate hike in February. Elsewhere, Sterling may find further support as a separate government report may show UK economic growth matched a two-year high in the fourth quarter of 2006 following sustained growth in the UK service sector and a rebound in consumer spending.

The recent lacklustre performance of the U.S dollar continued yesterday following a distinct lack of U.S economic data to support the currency and that trend may continue until Thursday with the release of key housing data and durable goods orders. The Dollar dropped to a fresh 14-year low against Sterling before a retracement back under 1.9800 overnight but it does seem increasingly likely that we will launch another assault on the $2 level over the coming weeks.

The Euro has come under increased pressure against the majors in recent weeks following a shift in the tone and language used by the ECB with regards a further tightening of European interest rates. However, the single currency received a much needed boost yesterday as an industry report showed robust growth in industrial orders for the month of November, which will only increase the chances of a further quarter-point rate increase next month. Orders came in slightly higher than the anticipated 1.2% and as a result, the Euro reversed earlier losses against the Pound to finish the session 0.1% higher while the single currency also rose 0.6% versus the Dollar by the close of trading last night.

Data Released 24th January

UK 09:30 BoE Minutes of January Meeting

UK 09:30 Preliminary GDP (Q4)

UK 09:30 Current Account Balance (Q4)

written by Adam Solomon

The positive sentiment surrounding the Pound continued yesterday as the Rightmove survey showed that UK house prices rose 0.5% in January while the annual rate was up 13% from this stage last year, which is the fastest growth since October 2004. Despite a further tightening of UK interest rates it seems the sustained and unrelenting growth in the property market will continue this year and that will lead to increased speculation that interest rates will rise beyond the current 5.25%. As a result, the Pound advanced 0.4% against the Dollar to open this morning above 1.9800 and we also achieved a fresh two and a half year high versus the Euro by the close of trading last night. In terms of economic data, Sterling may receive a further boost this morning as the Confederation of British Industry releases their monthly survey, which is expected to show further growth in production and manufacturing output.

The Euro has come under increased pressure over the past few weeks and that trend continued yesterday following a report on German producer price inflation, which unexpectedly declined in December following a significant drop in energy prices over the same period. With price pressures seemingly on the retreat, the chances of a further rise in European interest rates continue to decline with the ECB monitoring the threats to price stability over the next month. The Euro has fallen to a near three year low versus the Pound almost on a daily basis over the past week but a report this morning may provide some respite as industrial orders are expected to rise 1.2% in November.

Following a distinct lack of economic data released in the States until Thursday, the Dollar has continued to decline against the majors as the market eagerly awaits further evidence of a rebound in the U.S housing market ahead of the FOMC rate announcement next week. Prior to a band of positive economic reports, it was widely anticipated that the Federal Reserve would begin cutting U.S interest rates in the first quarter of the year. However, with strong growth in consumer spending and a rebound in manufacturing providing support, the Fed have adopted a neutral stance on monetary policy and we expect interest rates to remain unchanged at 5.25% for the first half of the year.

Data Released 23rd January

UK 11:00 CBI Monthly Trends Survey (January)

EU 10:00 Industrial Orders (November)

written by Adam Solomon

Following on from last week, the Pound continued to rise against the majors, achieving a new two and a half year high versus the Euro and consolidating the recent gains against the Dollar as UK retail sales rose the highest level in 18 months. Faster economic growth and a significant rise in personal income sent sales rising 1.1% in December, the most since June 2005 while the core rate soared 3.7% from a year earlier. The report will only fuel further speculation that consumer spending will remain relatively positive despite three quarter-point rate increases since August last year. The focus this week in terms of economic data will fall heavily on the minutes from the Bank of England's last policy meeting where the MPC surprisingly elected to lift interest rates to 5.25%. It is widely anticipated that the eight-strong committee unanimously voted to hike rates in January but the tone and language of the report will be heavily scrutinized for any indication of a further rise in interest rates in February or March. The Pound has made gains against the majors this morning as the Rightmove survey showed that UK house prices rose 0.5% in January and it seems that two quarter-point rate increases last year has done little to dampen demand.

The Euro continued to decline against the majors last week as Euro-zone inflation remained unchanged at 1.9%, which further underlines the rather dovish rhetoric from the European Central Bank with regards a further tightening of European interest rates. The single currency may come under further pressure this week following a sparse supply of economic data released in the Euro region with the focus falling on the German Ifo index into business confidence. The index is expected to rise modestly in January as fears over the impact of the value-added tax increase continue to ease although German inflation may rise considerably in the meantime. However, a gauge of producer price inflation has already been released this morning and prices for December have slowed following a significant drop in energy prices over the same period.

The Dollar ended the week on a positive note, firming an additional 0.3% against the Euro as U.S consumer confidence rose to a three-year high in the preliminary estimate for January. A significant drop in energy prices and a strengthening labour market pushed wages higher, which has obviously had a positive effect on confidence and retail sales that should prevent the U.S economy from a 'hard landing' this year. There is a distinct lack of fundamental data released in the States this week with the focus falling on the housing sector. In the past week, speculation has continued to mount that the sustained slump in the housing market has finally peaked and therefore, existing and new home sales will be watched closely for a further indication of a rebound in the sector.

Data Released 22nd January

U.S 15:00 Leading Indicators (December)

written by Adam Solomon

Initially, the Dollar managed to make significant gains against both the Euro and the Pound yesterday but by the close of trading last night, the Dollar was only 0.1% higher against the single currency following a rumour that a U.S warship had been struck by an Iranian missile in the Arabian Gulf. There was a barrage of positive economic data released in the States yesterday that gave a boost to Dollar sentiment as U.S consumer prices accelerated for the first time in four months in December. The index increased 0.5%, the most since April last year, suggesting that inflationary pressures still remain and provides a further indication that the Federal Reserve will keep interest rates on hold over the coming months. Elsewhere, a separate report from the Commerce Department on the U.S housing market showed that the economy is rebounding from last year's slowdown as home starts unexpectedly rose 4.5% in December. In addition, the weekly jobless report showed that first time claims fell to an 11-month low in the week ending 13th January while manufacturing in the Philadelphia region showed signs of growth.

The Euro managed to claw back some modest gains against the Dollar last night but fell to a fresh two and a half year low versus the Pound following a distinct lack of fundamental data released in the Euro-zone. The sole release came in the shape of the ECB monthly bulletin, which largely reiterated the negative sentiment regarding future monetary policy that was expressed by the chairman, Jean-Claude Trichet last week after the ECB kept interest rates on hold at 3.5%. The tone and language used by Trichet and several other policy makers seems to have shifted away from the anticipated hike in rates next month as the Central Bank continues to monitor risks to price stability.

Sterling managed to make further gains yesterday, firming an additional 0.2% against the Dollar and climbed to the highest level versus the Euro since August 2004 despite the obvious lack of any economic data. Therefore, it seems the surprise rate increase by the Bank of England last week is still providing a boost to Sterling sentiment and the inflation report on Monday has only served to increase speculation that rates will go to 5.5% by March. The Pound may trade higher this morning following a report on UK retail sales, which is expected to rise for a third consecutive month in December as consumers stepped up spending ahead of the Christmas period.

Data Released 19th January

UK 09:30 Retail Sales (December)

U.S 15:00 Michigan Sentiment (January Prelim)

written by Adam Solomon

The Pound continued to climb higher yesterday, jumping to a fresh two and a half year high against the Euro and increased a further 0.4% versus the Dollar following a particularly positive report on the UK labour market. Unemployment claims fell by more than expected in December, falling towards a nine-month low following a significant expansion in UK service industries. The number of Britons out of work and claiming benefits fell 5,500 on the month to an annual 943,100, the lowest level since March last year while the unemployment rate stayed unchanged at 3.0%. A swelling workforce will undoubtedly lead to higher wage demands and that has prompted further speculation that the Bank of England will need to raise interest rates again in February or March. A separate report yesterday showed that the average hourly earnings rose 4.1% in the three months to November, which was largely unchanged from the previous quarter and was slightly below the forecasted rise to 4.2%.

The Euro remained largely unchanged against the Dollar yesterday but fell a further 0.3% versus the Pound despite a round a positive economic reports, which showed that Europe's trade surplus widened in November. As lower oil prices and a strong Euro reduced the cost of energy, the surplus grew to €4.5 Billion from a revised €2.4 Billion the previous month with exports rising 1.7%. Elsewhere, the Euro continued to decline as a separate report on consumer prices showed that Euro-zone inflation came in unchanged at 1.9% in December. The preliminary estimate held below the ECB's 2.0% target for the fourth month in succession while the core rate came in slightly under expectations at 1.5%. Therefore, the inflation numbers yesterday provide an insight into the reasons behind the shift in tone from the ECB and perhaps explains why Euro-zone interest rates may stay unchanged at 3.5% next month.

The Dollar held firm against the Euro yesterday but by the close of trading last night had slipped back towards 1.9700 versus the Pound following a string of economic data released in the States. Firstly, a report on producer prices showed that a gauge of inflation had risen by more than expected in December, reflecting higher petrol prices over the same period. However, the price of crude oil has dipped 20% since mid-November and therefore, the report yesterday will only fuel speculation that interest rates will remain on hold as prices continue to ease. Elsewhere, the Dollar also failed to capitalise following a positive report on industrial production, which rose by more than expected in December and may provide an indication of a rebound in U.S manufacturing following greater demand at home and overseas. The focus today in terms of economic data will fall on the release of the consumer price index for December, which is expected to show that prices rose 0.4%, the highest month-on-month increase since July. The report is also expected to show inflation running at 2.6% at the end of 2006, which is the biggest gain in five years and will keep the Federal Reserve on alert to monitor the continued threats to price stability.

Data Released 18th January

EU 09:00 ECB Monthly Bulletin

U.S 13:30 Consumer Price Index (December)
U.S 13:30 Housing Starts (December)
U.S 13:30 Initial Jobless Claims (w/e 13th January)
U.S 15:00 Leading Indicators (December)
U.S 17:00 Philly Fed Index (January)

written by Adam Solomon

The Pound came under a modest amount of pressure yesterday, falling 0.3% versus the Dollar and 0.2% against the Euro following the release of the Consumer price index, which showed that UK inflation had risen to a 10-year high in December. However, the figures failed to exceed expectations as the core CPI rose to 3.0%, which is the fastest pace since the series was introduced in 1997 and the figures will only underline the Bank of England's decision to lift interest rates early in January. Prior to the release of the data, there was widespread speculation that inflation would come in above 3.0% in December. A situation that would of forced the governor of the BoE, Mervyn King, to write a letter to the Chancellor explaining why inflation was so far above the 2.0% target. The Pound was also hampered by the RICS house price balance, which showed that UK house prices fell to a four-month low in December, a sign that rising interest rates may help cool the UK housing market. There is some significant data released in the UK this morning and Sterling may receive a boost as the average hourly earnings may rise to 4.2% in the three months to November while elsewhere, a separate report may show unemployment unchanged at 3.0%.

The Euro managed to claw back some early gains against the Dollar yesterday and finished the session modestly higher versus the Pound following the release of the ZEW survey of investor confidence in Germany. The index rose to the highest level in six months in January, which was way ahead of expectations and provides yet further evidence that growth in the German economy will be able to accelerate despite the introduction of the value-added tax increase earlier this month. In terms of economic data, the focus this morning will fall on the harmonised consumer price index, which is widely expected to show that European inflation remained largely unchanged in December. The index will probably come in at 1.9% year-on-year last month, which perhaps underlines why the ECB elected to hold interest rates last week.

The Dollar has managed to stay relatively firm against the majors this week despite the lack of economic data released in light of the Martin Luther King Holiday. However, that trend is set to be broken this afternoon following a report on producer price inflation, which is expected to rise 0.5% in December, reflecting higher petrol prices over the same period. Prices jumped 2.0% the previous month, which was the biggest upward move since 1974 and in December, core prices, excluding the volatile food and energy, probably rose 0.1% on the month. Elsewhere, the Dollar may come under some pressure following a separate report on U.S industrial production, which is expected to increase slightly in December as a slowing economy has a negative impact on demand and output.

Data Released 17th January

UK 09:30 Unemployment (December)
UK 09:30 Average Hourly Earnings (3 months to November)

EU 10:00 Trade Balance (November)
EU 10:00 Harmonised CPI (December)

U.S 13:30 Producer Price Index (December)
U.S 14:00 TICs - Net Capital Inflow (December)
U.S 14:15 Industrial Production (December)
U.S 17:00 NAHB Housing Market Index (January)
U.S 19:00 Fed Beige Book Published

written by Adam Solomon

The Pound advanced yesterday to consolidate its recent gains against the majors by firming an additional 0.2% versus the Euro to trade at the highest level in two and a half years. Sterling found support as a gauge of inflation showed that producer output prices rose 0.2% in December, the highest since August last year, which further underlines the Bank of England's decision to lift UK interest rates this month. However, the focus this morning will fall heavily on a separate government report, which is widely expected to show UK inflation at the highest level in a decade. The consumer price index, which rose to 2.7% year-on-year in November, is expected to rise to 3.0% in December, the highest since August 1992. If the index on consumer price inflation comes in above the consensus then we can expect the Pound to make further gains against the majors after firming a further 0.3% versus the Dollar by the close of trading last night. However, if the gauge of inflation falls short of the anticipated 3.0% mark, Sterling may come under increased pressure as speculation will build that the BoE weren't entirely justified in raising rates early.

The Dollar remained largely unchanged against the majors yesterday, falling modestly versus the Pound and the Euro as the States observed the Martin Luther King holiday. There is a distinct lack of fundamental data released in the first half of the week but the Dollar may come under some pressure this afternoon as the Empire State manufacturing index is expected to fall to a reading of 20.1 from 23.13 in December.

The Euro rebounded against the Dollar yesterday after falling to a six week low on Friday following a considerably positive report on U.S retail sales. The positive sentiment surrounding the Euro may continue today as a report from the ZEW centre of economic research is expected to show that German investor confidence rose in January. The ZEW survey may rise to a reading of minus 10 this month, the highest level in five months, on forecasts that German economic growth will accelerate in the face of the value added tax increase, which was introduced at the start of the month.

Data Released 16th January

UK 09:30 Consumer Price Index (December)

GER 10:00 ZEW Expectations Balance (January)

U.S 13:30 Empire State Index (January)

written by Adam Solomon

My apologies for the lack of market updates over the past few days, I have been off work with a virus. Although, some might call it man-flu, normal service will now be resumed.

Following on from a turbulent week, the Pound continues to make widespread gains against the majors following the Bank of England's surprise decision to lift UK interest rates last Thursday. It was widely anticipated that the Monetary Policy Committee would keep rates on hold in January with the general consensus pointing towards a probable rise in February. However, following the third quarter-point increase since August last year, the BoE released a statement, which highlighted persistent inflationary concerns that will in turn lead to higher wage demands. In the previous gauge of consumer price inflation, the index showed a rise of 2.7% year-on-year in November, which is the fastest rate in over 10-years. This week, the focus in terms of economic data will be the CPI index for December, which is expected to show that UK inflation accelerated from 2.7% to 3.1% - the highest level since August 1992. That will perhaps explain why the MPC elected to hike rates early and increases speculation that interest rates may go up again in the not too distant future.

The capitulation of the Euro last week was a combination of the surprise rate increase from the Bank of England and the unexpectedly dovish remarks from the chairman of the European Central Bank. The Euro has dropped to the lowest level against the Pound in over 2-years following the ECB's decision to keep their benchmark interest rate on hold at 3.5%. However, although the no change in monetary policy was widely expected, the accompanying press conference didn't deliver the sort of positive tone that would signal a probable hike in rates in February. However, the chairman, Jean-Claude Trichet used the same language as the previous statement and seemed to suggest that the committee would monitor the affects to price stability over the next month but neglected to used the 'magic words' "strong vigilance". Therefore, the particularly soft tone of the statement will scale back the possibility of a further rate increase next month and that provides an obvious insight into the weakness of the Euro.

The Dollar remained relatively firm last week, falling back towards 1.9500 against the Pound in light of the BoE's decision to lift interest rates but made robust gains versus the Euro. A surprisingly strong report on the U.S labour market showed that the number of first time claims for state unemployment benefits actually fell by much more that expected in the week ending January 6th to the lowest level in five months. In addition, a separate government report showed that U.S retail sales rose by 0.9% month-on-month in December, which was better than expected as consumers hit the highstreet for the Xmas rush. The report provides a good indication that the U.S economy will be able to prevent a hard landing this year as growth in the retail sector and the labour market will be able to supplement the slump in housing.

Data Released 15th January

UK 09:30 DCLG House Prices (November)

UK 09:30 Producer Price Index (December)

EU 10:00 Industrial Production (November)

Written by Adam Solomon

The Euro continued to slide against the majors yesterday, holding near a six-week low versus the Dollar and falling an additional 0.4% versus the Pound following a surprisingly negative report on German retail sales, which unexpectedly fell 0.3% in November. In previous reports, highstreet spending has remained relatively strong over the past quarter but it seems concerns are growing that the introduction of the VAT tax increase will reduce disposable income and therefore weigh on consumer sentiment. The focus today in terms of economic data will fall on industrial production in Germany and the consensus forecast is for a 1% rise in output in November as growth in exports and increased investment has helped propel economic growth in Germany at the fastest pace in six years.

The Pound has made robust gains against both the Euro and the Dollar over the past 24hrs as speculation continues to increase that the Bank of England intend to raise UK interest rates next month. Despite a fundamental lack of economic data released in the UK yesterday, the Pound gained 0.7% versus the Dollar and that trend may continue this morning following a report from the British Retail Consortium. The BRC survey is expected to show a sharp pick-up in retail sales in December as consumers hit the highstreet to prepare for the Christmas period. Sales are expected to jump 2.5% year-on-year last month after a revised 0.5% increase in November and therefore, the survey may suggest that record employment and a strong housing market will support consumer spending.

Over the past week the Dollar has made unexpected gains against the majors as speculation continues to intensify that the Federal Reserve will adopt a neutral stance and hold U.S rates at 5.25% over the first half of 2007. Initially, the positive sentiment surrounding the Dollar continued yesterday and support for the U.S currency came from Oman, the fifth biggest oil producer in the Arabian Gulf, who said it favoured keeping most of its oil reserves priced in Dollars. However, by the close of trading last night the Dollar had relinquished much of the early gains following a government report on consumer sentiment, which seemed to suggest that growth in spending won't be sustained in 2007.

Data Released 9th June

GER 11:00 Industrial Production (November)

UK 11:00 BRC Retail Sales Survey (December)

written by Adam Solomon

Following on from the last week, the Dollar made substantial gains against Sterling amid a barrage of positive economic reports, which has shifted expectations away from an interest rate cut early this year and dimmed speculation that the dramatic slowdown in the property market will lead the U.S economy into recession. The support level at 1.9300 versus the Pound was breached on Friday following a stronger-than-expected employment report, which showed that the U.S economy added 167,000 workers to payrolls last month, the highest monthly increase since April last year. The U.S job report has added to recent evidence that the economy will be able to weather the slump in housing and manufacturing this year and that has prompted the Federal Reserve to adopt a neutral stance with regards monetary policy over the first quarter. In terms of economic data, the Dollar may find further support this week with the focus falling on the U.S retail sales report on Friday, which is expected to show growth at 0.6% on the month. While elsewhere, the monthly U.S trade balance may show that the deficit in goods and services actually widened in November, although not to a degree that is expected to weigh on Dollar sentiment.

The Pound came under intense pressure against the Dollar last week despite a string of positive economic data with UK mortgage approvals rising to a three-year high and growth in the service sector at the highest rate in nearly 11-years. That has prompted increased speculation that the Bank's monetary policy committee intend to lift UK interest rates by a further quarter-point over the coming months. However, the BoE are not expected to lift rates in the monthly announcement this Thursday and we will have to wait until the 18th of December and the release of the minutes of the meeting to gain an insight into the likelihood of a February rate increase.

Initially, the Euro made gains against both Sterling and the Dollar but following a surprisingly negative report on the European service sector, the single currency fell back towards 1.4850 versus the Pound by the close on Friday. The focus this week will undoubtedly fall on the ECB interest rate announcement on Thursday and although policy makers are expected to leave rates on hold this month, the accompanying press conference should provide an insight into future policy. In recent statements, the chairman of the ECB, Jean-Claude Trichet, has reiterated that the Central Bank will monitor very closely the current risks to price stability and therefore the language and tone of the press conference will be heavily scrutinized. However, taking into consideration the recent strength of economic reports there is a strong possibility that Trichet will use the terminology, "strong vigilance" to signal a further rate hike in February and that will provide a much needed boost to the Euro.

Data Released 8th January

GER 11:00 Manufacturing Orders (November)

U.S 20:00 Consumer Credit (November)

written by Adam Solomon

The Pound managed to rebound sharply against the Euro yesterday but fell for the second day in succession versus the dollar despite a host of positive economic reports. Firstly, the CIPS survey into the UK service sector rose to the highest level in nine years for the month of December, which suggests that the robust growth in services and the housing sector will continue to propel economic growth this year. Elsewhere, a separate report from the Bank of England showed that UK mortgage approvals increased to the highest level in three years in November, which will only prompt further speculation that the MPC will continue to lift UK interest rates beyond the current 5.0%. In recent reports, there seems to be an underlying resilience in the property market that the current lending rate is unable to slow to a degree that was anticipated. The BoE lifted rates to a five-year high in November but with house prices rising 10.5% over the course of 2006, it seems policy makers will have no choice but to continue monetary tightening.

The Euro came under increased pressure yesterday, falling 0.5% against the Dollar and the Pound following a surprisingly negative report on the European service sector, which unexpectedly slowed in December. The Purchasing Manager's Index showed that growth in service industries in the 12 nations sharing the Euro fell back to a reading of 57.2 from 57.6 the previous month. Although a reading above 50 indicates expansion, the report yesterday will fuel speculation that growth in the sector may have peaked. However, the Euro may receive a timely boost this morning following the release of the EC sentiment index, which is expected to show that confidence in the European economy rose to equal a six-year high. The index, which monitors business and consumer confidence in the Euro-zone, may provide an indication that the economy will continue to expand despite rising interest rates and the introduction of the German tax increase.

The very recent positive momentum surrounding the Dollar continued for a second day yesterday despite a mixed bag of economic data. Growth in the U.S service industries slowed by slightly less than expected in December but provided further evidence of a slowdown in the sector, which accounts for 90% of the U.S economy. The ISM non-manufacturing index fell to a reading of 57.1 from a six-year in November while a separate gauge indicated that factory orders rose 0.9% over the same period. Elsewhere, the Dollar continued to make gains despite a report on Pending Homes Sales, which provided an indication that the sustained weakness in the U.S housing market may extend into the new year. However, it can be argued that index, which unexpectedly dropped 0.5% in November, is pointing towards fairly stable housing market in the future. Without doubt, the focus today will fall heavily on the monthly U.S job report, which is expected to show that the economy added fewer jobs in December, which will cement the smallest employment gain since 2003. The Nonfarm payroll figure has become increasingly difficult to predict in recent months and although the unemployment rate is expected to remain unchanged at 4.5%, we can expect the market to fluctuate depending on the result.

Data Released 5th January

EU 10:00 EC Sentiment Index (December)
- Business Confidence
- Consumer Confidence

EU 10:00 Retail Sales (November)
EU 10:00 Producer Prices (November)

U.S 13:30 Nonfarm Payrolls
- Unemployment
- Average Hourly Earnings

written by Adam Solomon

Following a poor start to 2007, the Dollar advanced yesterday and made significant gains against the majors, firming 0.8% versus the Euro and a surprising 1.1% against the Pound following a particularly positive report on U.S manufacturing. The ISM index rose to 51.4 in December from 49.5 the previous month and with a reading above 50 indicating growth, the report will ease concerns that the Federal Reserve plan to cut interest rates in the first quarter of the year. Elsewhere, the ADP employment report showed that U.S companies had unexpectedly shed 40,000 jobs last month, which is the first decline since April 2003 and may provide an insight into Nonfarm Payrolls later this week. Nevertheless, the Dollar stood firm and managed to make gains against Sterling overnight following the release of the minutes from the Federal Reserve's last policy meeting. Several policy makers including the chairman, Ben Bernanke, reiterated that inflation remains the biggest concern, which will reinforce speculation that the Fed plan to keep rates on hold at 5.25% over the coming months. The focus today in terms of economic data will fall on the release of the ISM non manufacturing survey, which may show that growth in the service sector remained strong in December.

The Euro continued to make gains against the Pound yesterday as a sharp fall in German unemployment led to increased speculation that the ECB would raise interest rates up to three-times this year. The Central Bank lifted rates to 3.5% in December and although the chairman, Jean-Claude Trichet, neglected to be drawn on the outlook for future monetary policy, he did conclude that the ECB will do 'whatever is necessary to ensure price stability.' There is a host of significant economic data released in the Euro-zone this morning with the Purchasing Manager's index on European services expected to show growth beyond a reading of 57.6 in December. While elsewhere, a separate report may show that unemployment in the 12 nations sharing the Euro-zone actually shrank in November while the flash estimate for consumer prices may show inflation has accelerated beyond 1.9% year-on-year in December.

After making steady gains against the majors over the Xmas period, the Pound came under intense pressure yesterday following a distinct lack of economic data released in the UK. However, Sterling may be granted a reprieve this morning following the release of the CIPS services survey, which may show that growth in the sector held near a three-year high in December. Elsewhere, a separate report may show that UK consumer confidence rebounded sharply in December, which will only reinforce suggestions that the Bank of England plan to lift interest rates next month. In addition, the Pound may receive a further boost from a report from the BoE on UK mortgage approvals, which may hold firm at 128,000.

Data Released 4th January

UK 09:30 CIPS Services Survey (December)
UK 09:30 Mortgage Approvals BoE (November)
UK 10:30 Gfk Consumer Confidence (December)

EU 09:00 PMI Services (December)
EU 10:00 Unemployment (November)
EU 10:00 Flash HICP (December)

U.S 13:30 Weekly Jobless Claims (w/e 30 December)
U.S 15:00 Pending Home Sales (November)
U.S 15:00 Factory Orders (November)
U.S 15:00 ISM (Non-Manufacturing) (December)

written by Adam Solomon

The Pound managed to make significant gains against the majors yesterday, firming an additional 0.1% versus the Euro and a further 0.7% against the Dollar despite a worse-than-expected report on UK manufacturing. The purchasing managers index dropped to a reading of 51.9 in December as both input and output prices rose at a reduced rate, which suggests that inflationary pressures have moderated over the past month. However, it seems increasingly likely that the Bank of England will continue to raise interest rates in the first quarter as investors anticipate strong growth in consumer spending over the Christmas period, which will contribute heavily to higher inflation.

The Euro also began the new year in a positive fashion, rising 0.6% against a fragile U.S Dollar and only fell modestly versus the Pound following a particularly soft report on Euro-zone manufacturing. The index fell to 56.5 in December from 56.6 the previous month and although a reading above 50 indicates growth, the Euro came under a modest amount of pressure as European exports fell for the second consecutive month. However, following a host of hawkish comments from a number of ECB policy makers including the chairman, Jean-Claude Trichet, it is still widely expected that the Central Bank will lift interest rates to 3.75% as early as next month. The Euro has received a boost this morning as German unemployment fell by the most since 1990 as the fastest economic in six years encouraged companies to step-up hiring. The revised jobless rate dropped to 9.8% in December from 10.1% the previous month and at present it seems that the economy will be able to supplement the introduction of the VAT increase at the start of 2007.

The Dollar began the year on the back foot, falling dramatically against the major currencies as Americans were given the day off in honour of former president Gerald Ford. Therefore, the data due for release yesterday will now influence trading today with the ISM manufacturing report taking centre stage and the release of the minutes from the last FOMC rate announcement. Elsewhere, the Dollar may come under further pressure as a separate report may show a sustained drop in construction spending for the month of November while the ADP employment report may provide an insight into the Nonfarm payroll figure later this week.

Data Released 3rd January

GER 08:55 Unemployment (December)

U.S 13:30 ADP Employment Report (December)

U.S 15:00 ISM Manufacturing (December)

U.S 15:00 Construction Spending (November)

U.S 19:00 FOMC Minutes 12 December Meeting

written by Adam Solomon

Following on from last year, the dollar has declined against both the Euro and the Pound and dropped to the lowest level in over three weeks on speculation that the ISM manufacturing report this afternoon will show that growth in the sector stagnated in December. In addition, there is some hugely significant employment data released towards the latter part of the week with Nonfarm Payrolls expected to show that the economy added fewer jobs than anticipated in December. Growth in the retail sector and a buoyant labour market has propelled economic growth over the past year following a dramatic downturn in manufacturing and particularly housing. This has led to increased speculation that the Federal Reserve will begin cutting U.S interest rates early this year, which will continue to weigh on Dollar sentiment. The focus today in terms of economic data will be the release of the minutes from the last FOMC rate announcement where policy makers elected to hold rates at 5.25%. The minutes should provide an insight into future policy and therefore, the language and tone of the accompanying statement will be watched closely.

Over the past year, the Euro has appreciated 10.2% against the Dollar and that trend continued over the Holiday period as speculation continues to mount that European interest rates are set to rise while the Fed are deliberating over a cut in U.S rates. The Euro has also remained firm this morning following a particularly soft report on Euro-zone manufacturing, which unexpectedly declined last month. Growth in the sector stagnated following a further rise in European interest rates last month and with a strong euro hampering exports, the outlook for companies continues to look bleak. In addition, the Euro has also shrugged off a separate report on German consumer confidence, which declined from a five-year high last month following the introduction of the value added tax increase at the start of this year.

The Pound has made dramatic gains against both the Euro and the Dollar over the past year and following a round of particularly soft U.S data, we are edging back up towards 1.9750 versus the Dollar. There is a host of significant economic reports released in the UK this week with the focus falling on the CIPS services and manufacturing surveys, which are both expected to remain relatively robust for the month of December. Elsewhere, a separate report from the Bank of England on Thursday may show that UK mortgage approvals remained at an elevated level in November as a further rise in interest rates does little to quell demand.

Data Released 2nd January

UK 09:30 CIPS Manufacturing Survey (December)

EU 09:00 PMI Manufacturing (December)

U.S 15:00 ISM Manufacturing (December)

U.S 19:00 FOMC Minutes 12 December Meeting

written by Adam Solomon