The Bank of England release the minutes of the December meeting at 0930 GMT this morning with a 9-0 vote expected in favour of keeping rates on hold at 5.0%.

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Wednesday 20/12/2006

• Bank of England minutes due
• US PPI jumps
• Thai officials cause havoc in Asian markets
• Hawkish comments from US Fed
• Record close on Wall St
• Oil weakens ahead of US stockpile data

US Dollar:

Dallas Fed’s Fisher last night said that ‘unacceptably high inflation outweighs growth risk’ in the States
and that there would be ‘no choice but to advocate tightening if no inflation dip’. Despite the bullish
tone the dollar struggled to gain any significant ground as Asian dollar sellers sent the greenback
lower.
US PP data jumped yesterday despite the soft CPI figure last week reinforcing expectations that the US
may experience a softer landing than first thought.

Pound:

The Bank of England release the minutes of the December meeting at 0930 GMT this morning with a 9-
0 vote expected in favour of keeping rates on hold at 5.0%. MPC members are likely to wait and see
whether the two recent interest rate hikes are enough to keep inflation under control as mentioned in
the November Inflation Report.

Euro:

The Euro jumped to a record high vs the Yen yesterday as German business sentiment jumped to a 15-
year high increasing the likelihood of further rate rises in the Euro zone. ECB President Jean-Claude
Trichet testifies in front of the European Parliament today and traders will look for any hints of hawk-
ishness from the president.

General News:

• Yesterday Thai officials sent Asian markets into a tailspin in an attempt to halt the march of the
Baht. Officials imposed a 30% currency deposit restriction to end FX speculation. 15% was
wiped of the Bangkok stock market as investors ran for cover. Since yesterday Thailand has
been forced into an embarrassing U-turn in an attempt to halt the sell-off which spilled over into
other Asian stock markets.
• In New Zealand the current account deficit narrowed to NZ$14.4bln giving a touch of strength to
the kiwi.
• Australian GDP is expected to show a slower than expected growth on the back of the drought
which is still ongoing Down Under.
• Oil prices weakened slightly ahead of the US stockpile data due this afternoon with the headline
contract trading at $63.44.

Interbank
Updated 20th December
GB POUNDS / US DOLLAR 1.9719
GB POUND / EURO 1.4918
EUR/USD 1.3216
GBP/JPY 232.88
GBP/AUD 2.5121
GBP/NZD 2.8228
GBP/ZAR 13.7903
GBP/CHF 2.3923
GBP/CAD 2.2732
GBP/SGD 3.0365
GBP/THB 70.379
GBP/HKD 15.3276

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