Quiet day for loans rates and Sterling

There was very thin trade yesterday following President’s day in the United States and consequently the dollar remained unchanged against major currency pairs.

Looking at the recent weekly trend however demonstrates a slightly weaker dollar as there is a chance that positive data is no longer supportive for the dollar as the market has already priced in two more hikes by the Fed, evidenced by an unchanged USD following stronger PPI data last week.

The market will look for insight as to whether there is scope for further tightening beyond the anticipated 50bp in the minutes released today from the Fed meeting of the 31st January.

The ECB President Trichet’s address to the European Parliament yesterday had little effect on the currency markets. Comments included warnings that upside risks to prices had increased and that it was perfectly sensible for the market to price in further rate hikes.

The Great British Pound was helped by comments by Kate Barker, a vocal member of the Bank of England’s Monetary Policy Committee, who downplayed the chance of an economic slowdown and noted signs of an acceleration in consumer spending.

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