Yesterday’s trade was a quiet affair with market participants not prepared to jump into new positions ahead of tonight’s Federal Reserve meeting, the last of 2009.

Data was mixed yesterday from a global standpoint with UK CPI higher whilst EU ZEW was lower.

UK CPI printed at 1.9% for November against 1.5% in October. This jump is mainly due to the large fall in petroleum prices we saw a year ago as we flew into the teeth of the credit crunch. We expect CPI to continue to rise above the 2% target as we move into 2010 with cost pressures from the VAT rebalance in January also contributing. While inflation will rise we are still happy we will not see an interest rate rise until the mid part of 2010.

The ZEW index is a measurement of investor sentiment towards the economic strength of Germany. It fell to 50.4 yesterday against a previous reading of 51.1. This is combined with liquidity fears over Österreichische Volksbanken, the fourth largest bank in Austria, and Greece’s public finances. All in all this led to the euro falling to a two and a half month low against the dollar and close to breaching the 1.12 level against the pound.

We expect the reticence we saw in the markets to be reciprocated today as we wait on the Fed’s comments. While we do not expect any movement in the interest rate the accompanying statement will be closely read to determine an end point to the recent ultra-low interest policy.

Other than the Fed today we have advance surveys from the EU manufacturing and services sectors at 09.00, EU inflation at 10.00 and US CPI at 13.30.

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