Yesterday’s central bank announcements were disappointing in their lack of volatility as both the Bank of England and ECB decided to hold rates at their current levels of 0.5% and 1% respectively. The Bank of England also decided not to extend the amount of money pumped into the economy in the form of quantitative easing.

As for those of you who tuned in for yesterday’s webinar will know, we believe the Bank of England will decided on whether to close or extend the QE program after next month’s ‘Inflation Report’. This is so they can accurately gauge how much of an inflationary pressure the existing £175bn has already have and whether, given their mandate as an inflation targeting central bank, they can afford to push the boat out a little farther.

Trichet would not be drawn much on his or the rest of the ECB’s governing council’s views on the recent euro strength only repeating the same line from previous meetings of “Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability”. We do think the euro will fall back over the next few months but this may well be down to euro weakness as opposed to sterling strength.

Commodity currencies continued their recent extension yesterday as gold hit another record high for the 3^rd day in a row. Prices for the precious metal topped out at around $1055/oz giving AUD, ZAR and other commodity currencies a nice shot in the arm. Crude oil also rallied higher testing the $72 a barrel level which further weakened the US dollar in afternoon and evening trading.

The data calendar is light today with only UK trade balance and PPI (both due 09.30) to be aware of.

Have a good weekend.