USD

Fears of an emerging market crisis and a global slowdown
have driven world stock markets down into correction territory, as investors
begin the week in a nervous mood. The outbreak of nervousness in risk assets
has been attributed mainly to a combination of Fed tapering, slower Chinese
growth concerns and emerging market currency volatility. All of these factors
have contributed to investors moving to the safe haven of the US dollar.

USD

Fears of an emerging market crisis and a global slowdown
have driven world stock markets down into correction territory, as investors
begin the week in a nervous mood. The outbreak of nervousness in risk assets
has been attributed mainly to a combination of Fed tapering, slower Chinese
growth concerns and emerging market currency volatility. All of these factors
have contributed to investors moving to the safe haven of the US dollar.

The US had further bad news after Markit reported that the
US manufacturing PMI came in at a three-month low of 53.7 last month, down from
December’s 55.0. That suggests the pace of expansion slowed during the rough
winter weather, with some firms blamed disruptions from the extreme weather conditions
at the start of January. Export orders also fell, but more encouragingly firms
kept hiring.

EUR

Europe’s manufacturing sector continued to recovery in
January, data firm Markit has reported, with the strongest rise in activity
since May 2011. The index was up to 54, higher than December’s figure of 52.7.
This was led by positive figures from Greece, Germany, Italy and Spain. As a
result the euro had a strong day against the pound.

GBP

Britain’s factory recovery continued in January with a faster
rise in new orders, although the pace of the increase slowed a little in
January with the UK PMI coming in at 56.7. This was lower than expectations and
as a result we saw the pound weaken off against most of its counterparts.

Today

Earlier this morning the Reserve bank of Australia kept
interest unchanged at 2.5%. UK construction also expanded further in January to
64.6, boosting the pound in early trade. At 10am Italy is releasing their
January inflation figures. This afternoon we have US factory orders expected to
show a contraction after the impact of the US weather in December had a
detrimental impact on the US economy.

Key Announcements:

10.00am – EUR – Italian Consumer Price Index (Jan): Expected
to remain at 0.7%.

10.00am – EUR – Producer Price Index (Dec): Expected to
improve to -0.9%.

15.00pm – USD – Factory Orders (Dec): Expected to have
fallen by 1.9%.