The Bank of England MPC’ minutes from the December rate setting meeting were released yesterday

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Thursday 21/12/2006

• Bank of England vote 9-0 for pause in rate hikes
• ECB’s Trichet strikes a hawkish tone; lifts Euro
• US data due; growth and manufacturing
• Thai stocks rally after government U-turn
• NZ GDP much lower than anticipated
• US oil stocks dip pushing crude to 3-month high

US Dollar:

A raft of economic data is due from the US this afternoon as investors seek to gauge the health of the
world’s largest economy. Third quarter GDP is expected to have grown at a 2.2% annual rate which is
unchanged from previous estimates. In addition weekly jobless claims are expected to fall and the
Philadelphia Fed’s survey is expected to fall to 4.0 from 5.1.

Pound:

The Bank of England MPC’ minutes from the December rate setting meeting were released yesterday
revealing that all 9 members had voted to keep rates unchanged at 5.0% going into 2007. The MPC
stuck to its view that inflation would drop back next year toward 2.0%, but the minutes also showed
that members disagreed about the balance of risks with some placing more weight on news about upside
risks from money growth, investment, the housing market and inflation expectations.
The Telegraph carries yet another bullish house price story and that the housing market is set to enter
2007 with ‘significant momentum’.

Euro:

The euro rallied yesterday as ECB president Jean-Claude Trichet was noted as being more hawkish than
usual when speaking to the European Parliament. He noted that Euro zone inflation would likely rise
again in 2007 citing strong monetary and credit growth as ‘an upside risk for price stability’.
Trichet’s speech sent the Euro to an all time high against the yen and underpinned the European currency
against the dollar,

General News:

• Thai stocks rallied 11% after Thailand’s humiliating U-turn on currency controls. The rally failed
to make back the 15% initial drop on the stock market following the first announcement.
• New Zealand’s GDP growth dropped grew 0.3% (q on q) against an expected 0.7%.
• The drought currently ongoing in Australia is driving global wheat prices higher by 45% this
year. However the drought is expected to slow down Asia’s 5th largest economy after a strong
year on the stock market.
• Oil prices jumped to a 3-month high yesterday as US crude stocks dropped due to supply problems.
Overnight oil traded down as investors took their profits from the rally. $63.41.

Interbank
Updated 21th December
GB POUNDS /US DOLLAR 1.9687
GB POUND / EURO 1.4906
EUR/USD 1.3206
GBP/JPY 232.81
GBP/AUD 2.5026
GBP/NZD 2.8267
GBP/ZAR 13.6503
GBP/CHF 2.3914
GBP/CAD 2.2575
GBP/SGD 3.0315
GBP/THB 71.5921
GBP/HKD 15.3024

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