Current Exchange Rates

Currency	Current Rate
GBPUSD	1.5694
GBPEUR	1.1394
EURUSD	1.5672
GBPJPY	140.38
GBPCHF	1.6716
GBPAUD	1.7899
GBPCAD	1.6745
GBPNZD	2.2601
GBPSGD	2.2205
GBPHKD	12.178
GBPCZK	29.715
GBPPLN	4.6385
GBPSEK	11.4948
GBPDKK	8.4803
GBPNOK	9.2621
GBPTHB	51.9799
GBPZAR	12.0923

*These are indicative rates only, based on interbank prices at the time of writing. For exact rates please call our dealing team on +44 (0)1375 489 480

Market Overview

The Sterling took a knock yesterday, when the trade balance data come out worse than had been expected. The Visible Trade balance deficit grew from £6,798Billion to £7,278Billion when the deficit had been expected to shrink to £6,700billion. The trade balance with Non-EU countries also worsened with the deficit growing to £3,553Billion from a downwardly revised £3,125billion. Again the deficit was expected to shrink to £3,100billion. There was further bad news with the total trade balance which showed a deficit of £3,262billion from a much narrower deficit of £2,926billion. Yet again economists had expected the deficit to lower to £2,800billion. Needless to say this data did not support Sterling and its value dropped.

Optimism for small businesses grew in the US according to a report from the NIFB. The report showed that optimism had grown from December’s reading of 88.0 to 89.3 in January. Meanwhile Wholesales inventories fell by 0.8% in December following an upwardly revised increase of 1.6% in November. It had been expected that inventories would have increased by 0.5%. Sticking with US data, Consumer confidence scored -48 after seeing a figure of -49 in Feb 7. This is a mild improvement in consumer sentiment although still a negative outlook.

Westpac released a report on consumer confidence in Australia for the month of February. The previous report saw January’s consumer confidence rise by 5.6% and the index figure read at 120.1. However February looks much bleaker with confidence falling by 2.6% and the index giving a lower reading of 117.0. The Australian dollar would’ve gained strength had February's data show a maintained of higher increase in consumer sentiments. However because the reverse has happen then we should see downward pressure on the Aussie dollar.

Australian home loans fell by 5.5% in December after November saw a downwardly revised decline of 6.1%. Home loans were expected to see a decline of 5.0%. Investment lending in Australia grew by 1.9% in December. November had seen lending grow by 1.7% but this had been revised down from its original figure. Lastly, the value of loans in Australia fell by 4.7%, like home loans this was from another revised decline of 4.0% in November. Overall this data is negative for the value of the Aussie dollar.

Today’s European data has mainly focused on French industrial and manufacturing production. Industrial production was expected to increase by 0.5% in December after November saw an increase of 1.1%. The actual figure shows a decrease of 0.1%. The annualised data shows a contraction of 2.3% from the previous report’s decline of 3.8%. Economists had expected to see a drop in production of only 1.6%. Manufacturing also saw a contraction with a 0.8% fall in production against the downwardly revised 0.8% increase. The original figure had been a 1.6% increase seen in the preceding month.

The UK will be following suit with the release of its production figures. Industrial production is expected to increase in December but at a slower pace with only 0.2% growth when compared to last month's increase of 0.4%. The annualized data is expected to show the pace of decline slowing down to 4.1% when the previous month's decline of 6.0%. December is expected to see manufacturing increase by 0.3% after seeing no change in production in the month of November. The year-on-year data is expected to show a contraction in manufacturing of 3.0% compared to November's contraction of 5.4%. The data is expected to show an overall picture of improvement in UK production which is beneficial to UK economy and thus good for the value of Sterling.

Headlining the UK economic calendar is the Bank of England’s quarterly inflation report. Mervyn King and company had said that although the annual pace of inflation has approached 3% recently and is likely to remain elevated in January, this largely owes to oil prices and see CPI growth decline to meet the 2% target level over the medium term. Traders will be keen to see the reasoning behind this projection as they decide if, as the BOE suggested, the existing stock of asset purchases and the record-low benchmark lending rate are sufficient to secure “a gradual recovery”.

Due for release at some point today, London-based think tank NIESR will release their estimate for the pace of UK Gross Domestic Product growth in the three months to January.

US mortgage applications are due for release at midday. The weekly report showed that in the previous week applications grew by 21%. There were no estimates given for this report but should applications for mortgages continue to increase then this will add some weight to the Dollar’s value as individual are secure enough in their finances to afford mortgage payments.

The afternoon will see US Trade balance figures for December. November's balance showed a deficit $36.4Billion, should December's balance show a reduced deficit then we will see some weight added to the value of the Dollar. However an increased deficit will see downward pressure on the Dollar.

Finally, and much later into the evening the US will release their monthly budget statement. December saw a deficit of $91.9 billion, should this deficit widen then expect to see downward pressure on the Dollar, but if it narrows then expect the reverse to happen.

Data Releases

DAY	TIME	CURRENCY	EVENT
WED	09:30	GBP	Industrial Production (MoM) (DEC)
WED	09:30	GBP	Industrial Production (YoY) (DEC)
WED	09:30	GBP	Manufacturing Production (MoM) (DEC)
WED	09:30	GBP	Manufacturing Production (YoY) (DEC)
WED	10:30	GBP	Bank of England Quarterly Inflation Report
WED	13:30	USD	Trade Balance (DEC)
WED	14:30	USD	Fed's Tarullo Testifies Before Senate Panel on Systemic Risk
WED	15:30	USD	DOE U.S. Crude Oil Inventories (FEB 5)
WED	15:30	USD	DOE U.S. Gasoline Inventories (FEB 5)
WED	15:30	USD	DOE U.S. Distillate Inventory (FEB 5)
WED	17:45	USD	Fed's Plosser Speaks in Philadelphia on Financial Crisis
WED	19:00	USD	Monthly Budget Statement (JAN)

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