A fairly quiet day on the news front yesterday with no data
being released form the UK or Europe. The big market moving news was new
Federal Reserve Chairman Janet Yellen testifying in front of congress.

USD

A fairly quiet day on the news front yesterday with no data
being released form the UK or Europe. The big market moving news was new
Federal Reserve Chairman Janet Yellen testifying in front of congress.

USD

Janet Yellen declined to give any specifics about whether or
not the Fed would slow the pace of cuts it is making to its now $65bn a month
quantitative easing (QE) stimulus program. Yellen said the Fed will likely
reduce the pace of asset purchases in further measured steps at future
meetings. But she also noted that the bond-buying program was “not on a pre-set
course”. She said a “notable change in the economic outlook,” could cause the
Fed to pause in the pace of its cuts.

She was also surprised by the recent poor job figures
released in January and suggestion it could well be due to the extremely bad
weather seen in the US over these months. And while unemployment in the US has
fallen, she stated that those out of a job for more than six months continued
to make up an unusually large fraction of the unemployed, and the number of
people who are working part time, but would prefer a full-time job, remains
very high.

During the trading day prior to and during her speech we did
see the dollar weaken off.

An extension of the US debt ceiling passed its first hurdle
last night, with the US House of Representatives approving a one year extension
of the Federal debt ceiling limit. The issue will now be passed onto the senate
for consideration. On 27^th of February the US treasury are expected
to exhaust their borrowing capacity.

CNY

Earlier this morning we has some excellent trade balance
figures form China showing a US$31.8bn surplus, far exceeding the an estimated US$23.65bn
surplus. This was largely off the back of much higher than expected
international trade in January with Exports rising 10.6% and Imports 10%. Off
the back of this news the Australian and New Zealand dollars both strengthened.

Today

All eyes will be on Mark Carney this morning when the Quarterly
Inflation Report is released and he gives an update on Forward Guidance. Under
the current program, the Bank won’t consider raising borrowing costs until the
UK unemployment rate has fallen to 7%, which the Bank envisioned sometime in
2016. It now stands at 7.1%. Many economists expect Carney to argue that the
recovery is still not yet strong enough. With real wages still not rising and
there still considerable spare capacity in the UK economy. With both of these
conditions in place it is unlikely interest rates will rise any time soon.

Key Announcements:

10.00am – EUR – Industrial Production (Dec): Expected to
fall to 1.8%. 

10.30am – GBP – Bank of England Quarterly Inflation Report
and Mark Carney Speech.

15.30pm – EUR – ECB President Mario Draghi Speech.