Euro Pounds Brief Thusday 8/02/2007

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Thursday 08/02/2007

• MPC interest rate decision today; mixed predictions
• Sterling slips ahead of MPC today
• ECB rate decision; no move expected
• Dollar fails to break trading range
• Australia jobless rebounds; Aussie gets a lift
• Oil still stable as cold weather continues

US Dollar:

Another fairly quiet day in the US markets; the only major release came in bang on target which meant cable
struggled to do anything other than trade just above and just below 1.97 for the day. The euro gained some
ground and this morning sits at around 1.30.
This afternoon we have initial jobless claims and wholesale inventories however these should take a back seat
to the MPC and ECB rate decisions and subsequent press conference.

Pound:

Huge day in the UK markets today as the MPC decide on the interest rate for February. Most players seem to
be plumping for a no move this month and a hike in March however there is a very strong case for a move
today. Why wait? NIESR released a report overnight showing that GDP is growing at 0.8% and called for an
immediate rate hike to pre-empt inflation and high pay settlements. The Times’ Shadow MPV voted 6-3 in
favour of holding rates at 5.25% indicating a move may signal panic on the BoE’s behalf and ‘risks overkill’.
The decision is due at 1200 so we should see some volatility creeping in from now until midday.
This morning HBOS house prices came in way stronger than expected which will also add pressure to an already
stressed MPC to hike rates.

Euro:

The ECB decide on February interest rates today with no move expected. President Trichet is expected to use
the key word vigilance in his press conference to signal a hike in March. Trichet should also mention the
sources relating to Friday’s story regarding a pause in the rate hike cycle following the next move. Decision
due in at 1245 with the press conference scheduled for 1330.

General News:

• The yen slipped in overnight trade as BoJ board member Haru said ‘there was no rush to raise interest
rates’. Haru also rubbished comments from European officials that Japanese borrowing costs were too
low. Japan is now looking at a rate hike in the March-June quarter.
• Australian jobless rates hit a 30 year low overnight which gave the Aussie dollar a strong bid clawing
back some of the losses seen in the approach to the RBA rate decision.
• Swiss inflation figures came in lower than expected hinting that we may see an end to spiralling costs.
• Oil traded down yesterday but caught a bid overnight in Asia with cold weather sweeping across the
US and Europe. This morning we are at $58.06.

Interbank
Updated 8th February
GB POUNDS / US DOLLAR 1.9676
GB POUNDS / EURO 1.5140
EUR/USD 1.2998
GBP/JPY 238.45
GBP/AUD 2.5224
GBP/NZD 2.8656
GBP/ZAR 14.0875
GBP/CHF 2.4531
GBP/CAD 2.3333
GBP/SGD 3.0185
GBP/THB 67.179
GBP/HKD 15.3778