The UK markets have been hit this morning on disappointing house price news released from the halifax group. The expectation was that house prices would dip 0.4% on a month on month basis. The actual fall was three times this at -1.3%. This news is still being absorbed by the financial markets this morning but does not bode well for the UK economy moving into 2011.

Markets are still digesting last weeks Non-Farm Payrolls. The figure was worse than expected yet still illustrated a significant increase in jobs in the US. The market will now look towards Decembers US Retail Sales report to establish further direction, the expectation is that the figure will support the Dollar with strong vehicle sales expected to contribute to the pending figure.

CPI and PPI reports for last month are due this week for the US and will help provide an insight into inflationary pressures. The headline rates are unlikely to be affected supported by the recent rally in the commodities sector.

Eurozone sovereign debt risk will remain at the forefront of traders positions ahead of debt auctions this week. An attack on the Euro on Friday afternoon saw significant decline against the majority of the most actively traded pairs and ongoing Euro selling pressure is expected this week.

Industrial production, German GDP and CPI reports reports are due out of the Eurozone this week. These figures are however unlikely to significantly impact direction. The Euro’s fate this week will be dictated by the markets response to the debt auctions, ECB meeting and associated press conference. Markets will pay close attention to the comments made in the meeting and the rhetoric or tone towards future policy on Eurozone sovereign risk and liquidity plans.

The Bank of England will also meet this week, with the key concern of mounting inflationary pressures to be addressed. CPI in November was at a worrying high of 3.3% and has exceeded the target inflation rate of 2.0% for 12 months. Economists maintain that in the near term any hike in interest rates is unlikely despite the recent uptick in inflation. The general consensus is that QE will also remain on hold. Medium term policy may however be affected.

If you have any requirements for currency or have any questions or queries in relation to the markets please don’t hesitate to contact me.

Best Regards
Luke Zorab

Torfx Currency Dealer

“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”