Euro Pounds Brief Thursday 11 January 2007

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Thursday 11/01/200

• US dollar gains on trade gap and hawkish Fed
• Bank of England set to keep rates on hold today
• ECB rate decision; markets look for clues
• UK homebuyers facing uphill struggle for first time buy
• Japanese rate hike sentiment subside
• Oil continues freefall

US Dollar:

Another good session for the greenback as the massive US trade deficit shows signs of stabilizing. The
headline figure came in at $58.2bn against and expected $60bn helping the dollar advance against its
major trading partners.
Fed officials Moskow and Fisher also helped the dollar by highlighting inflation dangers. Moskow added
that it is ‘certainly the case that additional firming may be needed’.

Pound:

The Bank of England MPC announce their interest rate decision for January at 1200 GMT. No move is
expected however a third of market participants are looking for a 0.25% hike, citing rising inflation and
soaring house prices. The shadow MPC, run by the Times newspaper are plumping for a rate hike.
Back to house prices; UK buyers are having to spend 82% of their annual income to step on to the
housing ladder, an average of £32,784.

Euro:

The ECB release their interest rate decision at 1245 GMT. No move is anticipated and all eyes will be on
the press conference held by President Trichet and any clues for a February move. The buzz word, as
ever, is vigilance. Vigilance is Trichet’s signal for an imminent rate hike. Most ECB members will be
looking towards 4.0% by the end of the year.
Meanwhile the euro-dollar cross remains below the 1.30 barrier which is fast becoming a resistance.

General News:

• More dovishness from Japan seems to be indicating that a rate hike this month is becoming less
and less likely. This time the market is citing former BoJ economist Takenaka.
• The US have deployed stealth fighters to Japan. This is the first time the US have based stealth
technology outside of the US. Officials say this is not in response to a specific threat.
• Aussie dollar bounces on employment data.
• Oil continued its freefall yesterday and overnight. This time US stockpiles are being cited as the
catalyst for the fall as data came in higher than expected.

Interbank
Updated 11th January
GB POUNDS / US DOLLAR 1.9338
GB POUND / EURO 1.4927
EUR/USD 1.2956
GBP/JPY 232.43
GBP/AUD 2.4736
GBP/NZD 2.8087
GBP/ZAR 14.1125
GBP/CHF 2.4105
GBP/CAD 2.2698
GBP/SGD 2.9800
GBP/THB 69.56
GBP/HKD 15.0744