You would think in the lead up to Christmas the world would want a quiet couple of weeks so everyone can ease into the holiday and be done with it. Not so much unfortunately as, although not make or break, we have a slew of important data releases for, in particular, the US and UK.
Tomorrow’s Fed meeting is by far the stand-out although we expect no monetary policy shift. One problem the Fed has however is that, even post quantitative easing, US government bond yields have continued higher. Granted some of the increase was seen last week after the decision to extend President Bush’s tax cuts by another 2 years but pressure has been building in the past month or so. The Fed may publish comments alongside their decision yesterday in a bid to temper this.
The main headlines for the UK’s week are the inflation and retail sales announcements on Tuesday and Thursday respectively. The inflation figure should show that CPI has been above target for the past 12 months adding to the pressures caused by Friday’s strong PPI releases. Obviously a strong figure will be beneficial to the pound as traders price out the likelihood of further quantitative easing and vice versa should it be poor. The rise in input prices and various commodities over the past few months are unlikely to see that happen however.
One country already taking measures to curb inflows of hot money and its inflationary properties is China whose central bank hiked its reserve ratio by 50bps on Friday. This came as a slight shock to the market and risky assets and the dollar became slightly skittish in the aftermath.
So far this morning the pound has been damaged after the housing website revealed that prices had fallen by around 3% in the past month and that falls of 5% next year were not out of the question. The most resilient areas are predicted to be Surrey and Central London while the West Midlands is the laggard.
The data calendar is quiet today.
| Indicative Rates | Sell | Buy |
| GBPEUR | 1.1938 | 1.1967 |
| GBPUSD | 1.5780 | 1.5805 |
| EURUSD | 1.3200 | 1.3219 |
| GBPJPY | 132.88 | 133.19 |
| GBPAUD | 1.6006 | 1.6028 |
| GBPNZD | 2.1047 | 2.1078 |
| GBPCAD | 1.5931 | 1.5961 |
| NZDUSD | 0.7490 | 0.7513 |
| GBPZAR | 10.79 | 10.84 |
| USDZAR | 6.8376 | 6.8673 |
| GBPPLN | 4.7926 | 4.8232 |
| EURJPY | 111.10 | 111.38 |
Rates are dependent on amount transacted.
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