Euro Pounds Brief Tuesday 9th January 2007

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Tuesday 09/01/2007

• US dollar slips despite Fed bullishness
• German trade surplus widens
• British pound advances ahead of MPC decision
• British retails sales dispel growth fears
• Australian retail sales lower than expected
• Oil slips again on warm weather

US Dollar:

The greenback slipped yesterday and in overnight trade despite hawkish comments from a Fed official
and a former Fed Chairman. Following on from Friday’s strong NFP data the Fed’s Kohn warned that it
is ‘too early to relax concerns on inflation’ and former Chairman Alan Greenspan noted that the US
economy ‘is showing signs of reacceleration’.
Both cable and Euro-dollar inched away from the lows seen last week as investors wonder if last week’s
rally had been overdone.

Pound:

The British Retail Consortium’s December data allayed fears of a consumer slowdown over Christmas.
Like-for-like sales showed a +2.5% y-o-y growth vs the Nov figure of +0.5%. The strength is attributed
to pre-Christmas sales and strong demand for luxury items including champagne and electronic
appliances. The strong data has added to concerns that the BoE will raise rates in Q1.
The chief UK economist at Morgan Stanley and former aide to Gordon Brown, David Miles, warned of
rising debt and a slowdown in growth. He also predicted that house prices were set for a potential crash
over the next few years.

Euro:

The German trade surplus widened to €18.5bn in November following a revision upwards. With the ECB
expected to leave rates on hold this week market participants will be looking for President Trichet to
provide an insight into the thinking of the governing council as to the future path of European interest
rates.

General News:

• Australian retail sales dipped below market consensus in November. The effect on the Aussie
dollar was offset by the weakness in the US dollar.
• North Korea is likely to test another nuclear device according to a senior US military official.
• The West are set to ‘ratchet up pressure’ on Iran over it’s nuclear programme and are looking for
the UN to impose further sanctions.
• Oil dropped again on continued mild weather on the US eastern seaboard and through Europe
with the headline contract currently trading at $55.82.

Interbank
Updated 9th January
GB POUNDS / US DOLLAR 1.9420
GB POUND / EURO 1.4908
EUR/USD 1.3031
GBP/JPY 230.94
GBP/AUD 2.4806
GBP/NZD 2.8008
GBP/ZAR 13.9483
GBP/CHF 2.4033
GBP/CAD 2.2820
GBP/SGD 2.9803
GBP/THB 69.508
GBP/HKD 15.1401