GBP

No real economic data out
yesterday in the UK apart from the fact that house prices have continued to
rise.

Mark Carney spoke yesterday with
regards to the currency union with Scotland. In which he basically stated there
will be significant risks for Scotland if it leaves the UK but keeps the pound.

Indicating that we would have
to have a monetary union and also fiscal risk sharing (interest rates) between
Scotland and the rest of the UK

GBP

No real economic data out
yesterday in the UK apart from the fact that house prices have continued to
rise.

Mark Carney spoke yesterday with
regards to the currency union with Scotland. In which he basically stated there
will be significant risks for Scotland if it leaves the UK but keeps the pound.

Indicating that we would have
to have a monetary union and also fiscal risk sharing (interest rates) between
Scotland and the rest of the UK

USD

The Federal Reserve decided last night to trim its monthly bond
buying by US$10bn to US$65bn, sticking to its plan for a gradual withdrawal.

They said labour market
indicators were mixed but on balance showed further improvement

The Fed also left its statement
unchanged that it will probably hold its target interest rate near zero “well past the time” that
unemployment falls below 6.5%, “especially if projected inflation” remains
below the committee’s longer-run goal of 2%.

The US dollar didn’t really
strengthen yesterday on the back of this but there has been some strength this
morning.

Emerging Markets

The South African Reserve Bank
unexpectedly increased its benchmark interest rate. They increased the interest rates to
5.5% from 5%.

This was partly to try and
reduce the inflation rate which is up to 6.3% and also to try and strengthen
the rand. However, on the back of the interest rate hike the rand weakened 2.6% against the pound as investors
worried about how the hike in the rate would hurt growth in the economy.

Even after
Turkey increased their interest rate yesterday, the lira initially strengthened
but pretty much reversed all its gains throughout the day.

Today

We had mixed
data from Europe this morning. German unemployment was slightly better than
expected remaining at 6.8% instead of worsening to 6.9% but economic sentiment
in the Eurozone region failed to rise as much as markets were expecting. The
euro has traded flat as a result.

Mortgage
approvals in the UK also failed to rise as much as markets were expecting and
as a result the pound has generally weakened across the board by an average of
0.6%.

Later this
afternoon, we have data economic growth figures from the US as well as the
release of the weekly jobless claims. Both sets of figures are set to worsen,
which could well halt the gains the US dollar has made so far today. 

Key Announcements:

13.00pm –
EUR – German Consumer Price Index (Jan): Expected to rise to 1.5%.

13.30pm –
USD – Gross Domestic Product Annualised (Q4): Expected to fall to 3.3%.

13.30pm –
USD – Initial Jobless Claims: Expected to increase to 330,000.