GBP

Sterling strengthened against the euro as a Bank of England
report showed mortgage approvals climbed to the highest level in six years last
month, although the data was slightly lower than market expectations.

The pound was weaker against the dollar at the moment but
that’s more because of dollar strength after the Federal open market committee
meeting, where they reduced their monthly bond buying program by US$10bn – a practice
that typically devalues a currency.

GBP

Sterling strengthened against the euro as a Bank of England
report showed mortgage approvals climbed to the highest level in six years last
month, although the data was slightly lower than market expectations.

The pound was weaker against the dollar at the moment but
that’s more because of dollar strength after the Federal open market committee
meeting, where they reduced their monthly bond buying program by US$10bn – a practice
that typically devalues a currency.

However, with the positive performance of the UK economy
at the moment, there is still a positive outlook for some pound strength.

The only factor at this present time which could derail
progress is next year’s referendum on independence for Scotland.

The UK treasury has already confirmed that should the
Scottish people come out in favour of a break from the Union, then the UK
government would honour all existing government bonds and the new Scottish
government would start its life without any debt commitments.

Carney also mentioned in yesterday’s meeting that if
Scotland gets it wrong, then it could lead to similar problems to those
suffered by the Eurozone which poses a major threat to the future prospects of
the pound.

USD

Figures officially showed that The US economy grew by
3.2% in the fourth quarter, which was spot on with expectations. It compares to
a 4.1% rise in GDP in the third quarter, and benefited from strong household
spending and rising exports.

Consumer spending, which makes up 70% of the economy,
rose by 3.3%, which is the strongest since the fourth quarter of 2010 while
exports grew by 11.4%.

One slight obstacle to the strength of the US dollar was
the latest set of jobless claims figures. The number of Americans filing new
claims for unemployment benefit rose by 19,000 to 348,000 last week compared to
an expected figure of 330,000. There was also of a slowdown in the housing
market. Pending home sales fell 8.7% in December, according to an index from
the National Association of Realtors. This was the lowest level since October
2011.

Housing sales have been hit by a rise in mortgage rates,
but the cold disruptive weather across the country in December forced people
indoors and prevented some buyers from looking at homes or making offers.

Today

Eurozone unemployment numbers are due for release this
morning. Despite the region emerging from recession last year and joblessness
falling in Germany, unemployment in the single bloc area remains stubbornly
high.

Eurozone inflation numbers are due for release also this
morning which should give a better indication as to what action the ECB may
take with regards to interest rates. Higher inflation would take pressure off
the ECB from reducing interest rates further and thus should give the euro a
reason to strengthen.

Key
Announcements:

10.00am – EUR – Consumer Price Index (Jan): Expected to
rise to 0.9%.

10.00am – EUR – Unemployment Rate (Dec): Expected to
remain at 12.1%.

13.30pm – CAD – GDP (Nov): Expected to fall to 0.2%.

13.30pm – USD – Personal Income (Dec): Expected to remain
at 0.2%.

13.30pm – USD – Personal Spending (Dec): Expected to fall to
0.3%.