Euro weakened yesterday to 2 month lows against the dollar as further cracks appeared in the robustness of the European economy. German manufacturing data combined with weak Europe wide retail sales figures were the main causes as hawkish sentiment continued from the USA.

Although we have both rate decisions today, more importance will be placed on Trichet’s explanatory comments at 13.30. We expect continued focus on the inflationary pressures European economies are facing and maybe hints as to rate cuts sooner than the August meeting that markets are currently looking for.

A Bloomberg survey released this morning showed that only 5 of 61 economists polled think a cut is the sensible option for the MPC even given the poor UK data released over the past week. We are with the consensus and anticipate a hold at 5%.

US data will also prove to be an important indicator as jobless claims are forecast to rebound lower as the US economy begins to regain its composure.

Email: (jeremy.cook@worldfirst.com) Please feel free to contact me at anytime regarding these briefings, if you have any questions or thoughts on them, or if you are interested in a particular event in the calendar. Please call us on 0800 783 6022 / +44 20 7801 9080 if you would like to discuss the markets or fix a rate.Please reply with REMOVE in the subject of your e-mail if you would like to be removed from this list.

GBPEUR 1.2723 1.2748

GBPUSD 1.9510 1.9534

EURUSD 1.5317 1.5338

GBPJPY 202.40 204.60

GBPAUD 2.0756 2.0808

GBPNZD 2.5284 2.5337

GBPCAD 1.9694 1.9754

GBPZAR 14.77 14.82

USDZAR 7.56 7.60

GBPPLN 4.3400 4.3656