·         2 opinion polls point to hung parliament

·         UK Manufacturing expands at the fastest rate in 15 years

·         RBA do not raise rates as expected, AUD loses 1.5%

·         Euro stronger on risk appetite.

All this and more is available on our blog. Click here  http://www.worldfirst.com/blog

The most important week for the pound since August started badly yesterday with political concerns the likely cause.

2 opinion polls over the weekend predicted a so-called ‘hung parliament’ (so called because I will probably hang myself should it actually happen) and political maneuvering yesterday by the Labour party towards the Lib Dems on voting reform have left those with sterling a little worried. The prospects of a surprise from the Bank of England on Thursday is also not helping.

Data was strong. All the manufacturing PMIs (UK, EU) and the US’s ISM all came in better than expected with the UK’s growing at the fastest pace in 15 years with export growth moving at the best pace since records began.

This saw a return to risk with equity markets moving higher, commodity and EM currencies up and bonds lower. The euro has been trading like an EM currency recently in so much that when risk is bid it will increase and vice versa. The European single currency was higher against the GBP, USD and JPY yesterday.

The big surprise in the markets has come overnight in the form of the RBA decision. We had predicted that rates would be hiked last night in response to their recent solid inflation and retail sales releases. This wasn’t the case however. It lost over 1.5% against the USD in the immediate aftermath with local equities volatile but still moving in an upward direction.

The US dollar has slackened a little overnight after President Obama submitted his latest budget to Congress. Gone are the lunar landings and other frivolities yet the figure has increased from a swollen $1.41trn to a corpulent $1.56trn. Any increases and “Christmas Tree Bills’ will only weaken the USD further. Passing the budget is a long process so these upside surprises will be felt over a period of weeks not days.

Data today comes in the form of PMI from the UK Construction sector (09.30), EU PPI (10.00) and US Pending Home Sales (15.00). More details can of course be found on the World First Economic Calendar which was attached to yesterday’s update.