Foreign Currency Report 23 May 2007

GBP
A quiet day for UK information yesterday saw sterling taking ground from the Euro and Dollar, ahead of the Bank of England minutes release today.

Traders will look into these to get some insight into the reasoning behind the interest rate hike earlier this month, and perhaps some indication on general sentiment for further projected increases throughout the year.

The BoE raised interest rates to a six year high of 5.50 percent earlier this month, taking them to the highest level among the G7 economic countries. Markets are now fully pricing in another rate hike by September and are giving indication of rates reaching 6 percent by year-end.

CBI Industrial Trend data released tomorrow may indicate any need for further rate increase in order to control inflationary pressure.

EUR
Yesterday's ZEW survey, in which over 300 European analysts are polled on their medium term expectations for economic outlook, indicated that economic sentiment for Germany continued its upward trend in May 2007. The indicator rose by 7.5 points on the back of strong industry figures.

Investment is improving and consumer demand is expected to recover soon owing to the continuous improvement of the German labour market. These positive figures are being reflected in the Eurozone with ZEW figures increasing by 11.6 points and now standing at 22.3 points.
Today traders will be looking towards Industrial New Orders figures for further indication of on the direction of the Euro.

USD
ABC Consumer confidence figures released last night lead the way for a quiet day on the Dollar. The indicator fell short of consensus projections and caused the dollar to lose ground.

The dollar has rebounded over the last month from its 26 year low against sterling as unexpectedly resilient U.S. economic data has implied the chances of a Fed rate cut this year are now reduced.
Today's market information is also light with figures on Crude Oil Inventories expected to produce any market movements. Housing and Initial Jobless claims released at the end of the week will lead the way for any decisive movements on the US exchange.