The
pound had some respite against the euro and US dollar, and strengthened in European
trade yesterday following comments made by Bank of England policy maker David
Miles that UK economic growth is likely to improve to between 2% and 2.5% within
18 months.

In
what looks to be a short term correction, his comments seemed to be taken
positively by the markets; inciting investors to book profits on sterling’s
recent weakness. However, we will need to see an improvement in economic data
to back this for David Miles’s forecasts to come true.

The
pound had some respite against the euro and US dollar, and strengthened in European
trade yesterday following comments made by Bank of England policy maker David
Miles that UK economic growth is likely to improve to between 2% and 2.5% within
18 months.

In
what looks to be a short term correction, his comments seemed to be taken
positively by the markets; inciting investors to book profits on sterling’s
recent weakness. However, we will need to see an improvement in economic data
to back this for David Miles’s forecasts to come true.

Despite
Spanish retail sales falling from its previous years figures; the euro was
buoyed yesterday following better than expected consumer confidence figures from
Germany as well as increasing risk appetite on optimism that fiscal turmoil in
the bloc is easing. The euro currently trades at a 14 month high against the US
dollar.

The
US dollar on the other hand weakened against most of its peers yesterday on
speculation that the US Federal Reserve may signal a change to its asset
purchasing program during the Monetary Policy meeting this evening. US consumer
confidence also fell below expectations putting the dollar under further
pressure.

Elsewhere
we saw the Australian dollar and New Zealand dollar rise buoyed by risk
appetite as well as business confidence in Australian rising by the most in
more than a decade and New Zealand’s trade deficit narrowing.

Despite
a plethora of economic data due for release today, the main focus for investors
will no doubt be the US Federal Reserve’s Monetary Policy meeting. With
speculation continuing to side for further monetary stimulus by the Fed, we may
well see a continuation of US dollar weakness leading up to the announcement.

 Key Announcement:

 9.30am
– GBP – UK Consumer Credit: Expected to increase to £0.2bln.

 9.30am
– GBP – Mortgage Approvals: Expected to increase to 54.5k.

 10.00am
– EUR – Consumer Confidence: Expected to increase to -23.9.

 13.15pm
– USD – ADP Employment Change: Expected to decrease to 165k.

 13.30pm
– USD – Core Personal Consumption Expenditures: Expected to decrease to 1%.

 19.15pm
– USD – Fed Interest Rate Decision and Monetary Policy Statement and Press
Conference.

 20.00pm
– NZD – RBNZ Interest Rate Decision and Monetary Policy Statement.