httpvh://www.youtube.com/watch?v=tLRmcIhb9kY

Join our webinar today at 2pm to get Jeremy’s views on whether this sterling rally will last and where could it be going? He will also take you through the Bank of England and ECB releases and what they mean for the UK and European economies. Email research@worldfirst.com for an invitation of you haven’t already received one.

We started to see cracks in the recent GBPUSD run yesterday for the first time as the pair ended an 18 year record of consecutive daily gains. With GBP services data poor and US non-manufacturing ISM better than expected we saw the pair move into the 1.58s from its recent home in the 1.59s. It will however take more than one piece of data to convince the market that the dollar is back and as such it remains at overextended levels.

With non-farm payrolls tomorrow afternoon and an assortment of other key pieces of market news soon (BOE today, Inflation Report and Fed meeting on Wednesday) this cross has a lot of movement still to come. The increased belief that the Fed will once again flood the market with cheap liquidity is keeping things very interesting.

The services PMI data was poor as we said earlier and fears over the UK jobs market have been resurrected with jobs being lost in the services sector for the first time in a while. Given that we are expecting job losses for people in the public sector due the government’s austerity measures jobs have to be available in others so as to suck up these work seekers. If there isn’t then growth is bound to be affected negatively.

South of the equator we have had some awful news from the New Zealand jobs market as employment fell by 0.3% as opposed to an expected 0.5% rise while the year on year rate has moved to 6.8% versus 6.3% in the quarter beforehand. This has lowered the odds of a rate hike by the RBNZ and has taken the kiwi dollar lower overnight. It is down 1.08% against the USD and 0.78% lower against GBP.

It is of course the first Thursday of the month and therefore we have both the Bank of England and European Central Bank decisions today. We expect that both will keep interest rates as they are (0.5% in the UK, 1% in the EU) and the BOE will not increase asset purchases. I doubt also that we will get a statement from Mervyn and the gang given we have the BOE Inflation Report next Wednesday.

Data elsewhere to be aware of includes German factory orders at 11.00 and US initial jobless claims at 13.30.