Sterling behaved as we expected yesterday with a rally immediately following the Bank of England rate decision before falling back later in the session as profit takers jumped out of positions.

Mervyn King and the rest of the MPC decided to cut rates to the lowest level in the Bank’s history to 1.5%. In the accompanying statement they told us off significant downside risks for output over the first half of the year plus a warning that CPI may dramatically undershoot the government’s target as the inflationary pressure exerted by food and energy prices wanes. A weaker sterling however will help support prices ceteris paribus. Further weakening by the MPC is probable with our expectation, as noted in our January predictions released yesterday, being a 50bps cut in February.

Gains made against the dollar yesterday were in the teeth of a better than expected initial jobless claims that saw only 467k jobs lost as supposed to the market’s view of 540k. Looking forward to today’s payroll data we expect a number of 550K, 30k more than expected, with the unemployment rate jumping to 7.0%. As for what this’ll do for the dollar we expect a stronger greenback as traders take profit against the sharp rises GBP and EUR have made over the recent sessions.

Have a great weekend.

Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our:

Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

To view any past or present currency blogs please click on the following link www.worldfirst.com/blog

Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.

Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.

You Might Also Want To Read

• Friday 06th June 08
• World First Foreign Exchange 23 February 2010: Market Close Podcast
• World First Foreign Exchange 17 November 2009 Update: Dollar Index slides to 15 month lows
• World First Foreign Exchange Podcast - 9 October 2009
• World First Foreign Exchange 18 December 2009 Update: UK Retail Sales Disappoint
• Bond Yields Rise, Dollar Bends But Doesn’t Break - World First’s Currency Exchange Morning Update - 29th May 2009
• World First Foreign Exchange 08 February 2010: Greece, UK Polls Ensure Lower Open For GBP
• Sterling In A Holding Pattern - World First’s Morning Update - 4th February 2009
• World First Foreign Exchange NZD / AUD Update: 10 March 2010
• World First in the press: Mail on Sunday 18 October 2009
• Darling Goes All In - World First’s Morning Update - 25th November 2008
• World First Foreign Exchange Podcast - 02 November 2009
• World First Foreign Exchange 08 March 2010: Market Close Podcast
• World First Foreign Exchange 24 September 2009 Update: Silence Is Golden For Pound
• Is Pound The Little Engine That Can? - World First’s Morning Update - 16th April 2009
• Positive US consumer confidence sends dollar spiralling - World First’s Morning Update - 27th May 2009
• GBP Falls As World Bank Spoil The Risk Party - World First’s Currency Exchange Morning Update - 23rd June 2009
• World First Foreign Exchange 10 February 2010: Market Close Podcast
• World First Foreign Exchange 7 August 2009 Update: Bank of England Slays Sterling
• Can The New Year Start With A Bang? - World First’s Morning Update - 2nd January 2009
• World First on expatfocus.com
• World First’s Morning FX Update - 14th July 2008
• World First Foreign Exchange Podcast - 24 August 2009
• World First Foreign Exchange 17 December 2009 Update: UK unemployment falls, Fed announce exit strategy
• World First in the press: investmentweek.co.uk 10 February 2010
• World First Foreign Exchange 24 February 2010: Confidence Hard to Come By
• GBP Through 1.14 As ECB Sits On The Horizon - World First’s Currency Exchange Morning Update - 7th May 2009
• World First NZD/AUD Weekly Update - 10th August 2009
• Profit Takers Take Pound Lower - World First’s Morning Update - 13th January 09
• Mr Economy? The Doctor will see you now
• World First Foreign Exchange 17 July 2009 update: The good news or the bad?
• World First’s Morning FX Update - 22nd July 2008
• World First Foreign Exchange 22 February 2010: Market Close Podcast
• World First Foreign Exchange 03 March 2010: Market Close Podcast
• World First’s Morning FX Update - 15th July 2008
• World First NZD/AUD Weekly Update - 1st December 2008
• World First Foreign Exchange 24 November 2009 Update: Dollar’s Day of Data; GDP, Consumer Confidence, Fed Minutes
• World First Foreign Exchange 12 January 2010: Market Close Podcast
• Thursday 29th May
• World First NZD/AUD Weekly Update - 23rd June
• World First Foreign Exchange 21 October 2009 Update: Pound Gains But Is Unable To Hold
• Sterling Continues To Battle - World First’s Morning Update - 5th December 2008
• World First in the press: Sunday Times 17 August
• Non Farms Point To Further Weakness - World First’s Morning Update - 9th March 2009
• World First in the press: Sunday Times 28 February 2010
• There May Be Trouble Ahead
• World First Currency Exchange Podcast - 18 September 2009
• Foreign Currency markets follow equity movements - Morning Update 26.06.09
• Improved Stimulus Helps Sterling - World First’s Morning Update - 13th February 2009
• World First Foreign Exchange NZD / AUD Update: 5 October 2009