EUR

The headline event of the day bought no real surprises. The
ECB held interest rates at 0.25%, which was largely expected. Also Mario Draghi
had no change in his stance with regards to future monetary policy, stating
that he expects inflation and the interest rate to stay low for an extended
period – which was no change from previous rhetoric.

EUR

The headline event of the day bought no real surprises. The
ECB held interest rates at 0.25%, which was largely expected. Also Mario Draghi
had no change in his stance with regards to future monetary policy, stating
that he expects inflation and the interest rate to stay low for an extended
period – which was no change from previous rhetoric.

Off the back of all this, the euro strengthened. Why? Due to
the low levels of inflation, markets were anticipating either an interest rate
cut or for Draghi to change his stance on monetary policy possibly suggesting a
rate cut could be on the cards. However, as Draghi did not mention any of this,
the euro picked up strength.

However he did add that effective from March, the ECB will
release new economic forecasts over a two year horizon – giving more guidance
to the markets.

USD

Data from the Department of Labour revealed that the number
of people filing for jobless claims fell by 17,000; more than markets had been
expecting. Whilst this new should have strengthened the US dollar, markets appeared
to focus more on the latest trade balance figures, which came in worse showing
that the trade deficit had widened more than expected to US$38.7bn. As a result
lost ground against the pound.

GBP

No big news from the UK yesterday as the Bank of England
unsurprisingly held interest rates at a record low of 0.5% and kept its
quantitative easing program at £375bn. Market still seem to be nervous ahead of
next week’s quarterly inflation report, with some even suggesting that Forward
Guidance may be amended by adding another factor which would enable the BoE to
increase interest rates.

Today

Data from the UK is forecasted to suggest that production in
industrial and manufacturing both dropped in December, which could cause the pound
to finish the week lower against most of its counterparts.

The main event of the day will be non-farm payroll figures
which is expected to show an extra 185,000 jobs were added in January; a bit
improvement following Decembers surprisingly poor report. A strong report will
vindicate the Fed’s decision to taper its quantitative easing program but could
also give a good case the extent of how future tapering could occur, depending
on how good the data is – as a result we would expect the US dollar to
strengthen should this occur

Key Announcements:

9.30am – GBP – Industrial Production (Dec): Expected to drop
to 2.3%.

9.30am – GBP – Manufacturing Production (Dec): Expected to
drop to 2.3%.

9.30am – GBP – Trade Balance (Dec): The deficit is expected
to widen to £3.1bn.

13.30pm – CAD – Unemployment Rate (Jan): Expected to drop to
7.1%.

13.30pm – USD – Non-farm Payrolls (Jan): Expected to increase
to 185,000.

13.30pm – USD – Unemployment Rate (Jan): Expected to remain
at 6.7%.

15.00pm – GBP – NIESR GDP Estimate (Jan): Previously at
0.7%.