Welcome to ECU's Investment Blog. This page is updated regularly to cover events impacting the global financial and currency markets.

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Markets have been fairly quiet in terms of data announcements over the last few sessions, but one significant development – or focus of attention – has been the frequency of Fed commentators. Over the last couple of sessions we have had Kocherlakota, Evans, Bullard, Plosser and Fisher. The overwhelming majority have expressed a dovish bias in their commentary, albeit with a consistent acknowledgement that the economy is improving amidst a period of increased global uncertainty.

The outlier, Fed governor Bullard, however, has today expressed a more bullish take on events, suggesting that now is the time “to start the process of turning around policy”. In addition to this, he suggested that if the economy is strong, then it may be time to start cutting QE2, with $100 billion the order of magnitude he moots. Although Bullard is not currently a voting member of the Fed’s policy committee, his comments have wrong-footed the market, or given a new impetus to an otherwise apathetic market.

Flows have been very light as the market waits to see the impact of month- and quarter-end flows this week. More importantly for the ongoing trend, the market is waiting for the US employment report on Friday before entering new positions. With the interest rate differential the key driver of FX recently, the Bullard comments will have a greater degree of impact in FX than other asset classes (equities for example are unmoved by the bullish rhetoric).

On the UK front, the data this morning was disappointing. The headlines will show that Q4 GDP was revised higher, back to the original -0.5% quarter on quarter, but the breakdown was weaker as consumer spending and household incomes were revised lower. It is worth noting that the 0.8% fall in household disposable income was the first annual fall since 1981. Inventories, investment and company profits countered the falls at a consumer level and led to the minor upward tweak, but the ONS maintains its view that ex-snow effects Q4 activity was broadly flat.

The Office for Budget Responsibility (OBR) maintains that underlying growth will pick up in 2011, despite the austerity measures which I feel are largely priced into GBP in the bigger picture. But for now, GBP is likely to provide better levels to buy.

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Yet another day of limited data to focus the market’s attention today has lead early trading to resume the focus on interest rate differentials and sentiment. US 10-year yields have risen from a low of 3.32% on Thursday to a high of 3.48% today and the USD has followed suit, rising on a trade-weighted basis, bringing many crosses from the brink of breaking out back into the year’s now established ranges.

With month- and quarter-end approaching, rebalancing flows will add to the volatility, with the market also jostling for position ahead of the all-important US employment report on Friday.

Political concerns add to the market’s directional confusion, with Portugal, Canada and now (after German Chancellor Angela Merkel’s coalition was defeated in the ‘southwest heartland’), Germany is added to the list.

In addition to the unsolved issues in Portugal and Ireland, the conclusion of the long-awaited 24/25 March meeting of European Heads of State turned out to be a bit of a damp squib. In simply ratifying the previously announced decisions and measures from Eurogroup and Ecofin, and delaying confirmation of the increase in size of EFSF until June, the market has been left a little disappointed. The resultant slide in EURUSD, however, presents what we see as a longer-term opportunity. It may not be this week, as apathy, month- and quarter-end flows as well as expectations for non-farm payrolls dominate, but, as we push into Q2, we expect USD to move increasingly to the back foot.

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Following on from yesterday’s BoE monetary policy minutes and the UK Budget, GBP has been a main focus of markets. The revelation from the minutes that there were no new additions to the ‘hawk’ camp disappointed some and GBP suffered on the day – a move which has been extended after this morning’s weak retail sales data for February. These factors potentially point to a concerning dip in consumer spending growth.

The Budget was fiscally neutral in its content and Chancellor Osborne stuck to his guns on the planned austerity measures, while heavy politicking in the content saw some ‘crowd pleasing’ bonuses to lower income families, the youth unemployed and innovative (or not) corporates. All these measures are to be paid for by an increase in the North Sea supplemental extraction tax (which saw oil and natural gas producers lower in equity markets).

The other main focus of financial markets has been the eurozone. Yesterday saw the first formal signs that planned – and required – austerity measures, particularly in the peripheral states, risk popular revolt. In Portugal, the Government’s deficit-cutting budget plan was rejected by parliament and, as a result, led to the resignation of Prime Minister Socrates.

Moody’s rating agency added to eurozone woes this morning by cutting the credit ratings of 30 Spanish banks. This, perhaps, comes as not a complete shock to the market, but once again highlights the fragilities and disparities of the monetary union.

Despite the rising political and credit concerns within Europe, EUR has performed remarkably well in the face of current adversity and that is leading to a fair amount of head scratching among market participants. There is a bigger theme evolving which we will discuss in greater detail over the next few days, save to say that we feel there are some significant moves ahead of us in FX markets and the relative calm at the current juncture may lull many into a false sense of security before we move. As Shaw Taylor oft said “Remember, keep ‘em peeled”.

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This morning’s release of the March 9/10 Bank of England Monetary Policy Committee meeting minutes was the major focus for GBP and more broadly on the ‘inflation fighting’ economies (those that have a bias towards higher rates in the short term). In reality, the minutes provided something for doves and hawks alike.

The vote was 6-3 to maintain the current policy interest rate, with the soon-to-be-replaced (May 31) arch-hawk Andrew Sentance voting for a 50bp hike to 1.00%, and the more moderate hawks Martin Weale and BoE Chief Economist Spencer Dale voting for a 25bp hike. The overall theme, however, remained one of ‘wait and see’, with the implication that some members of the committee who voted to keep rates on hold had acknowledged that inflation risks had risen and that there is a “significant risk that CPI rises above 5% in the near term.”

The committee also highlighted the additional variable of the impact of turmoil in the Middle East and that developing uncertainties in trade and consumer spending as a “key uncertainty”.

Overall, we still see the MPC as delivering a 25bp hike in the bank rate at the May meeting, in line with the February inflation report central projection. However, with the core view that inflation is likely to fall back in the medium term, the cycle is likely to be one of a gradual normalisation of interest rates.

Markets will now be looking very closely at the implications of the measures announced in this afternoon’s Budget to gauge the impact of austerity on the growth prospects of the UK. This will be key for the UK and for GBP in the short term before the theme of global differentiation comes back to the fore once more.

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The geopolitical situation in the Middle East and North Africa continues to deteriorate. However, the more socioeconomic events surrounding Japan (at least in terms of the positive developments at the Fukishima nuclear facility) seem to have calmed financial markets. Japanese equities posted a strong positive this morning (Nikkei +4.36%) after being closed yesterday, following on from a positive equity backdrop in Europe and the US yesterday. With investors still seemingly underinvested and a reduced chance that global developments will cause another sharp decline in equities, we anticipate that this positive equity backdrop will continue in the short term.

In terms of foreign exchange, the fundamental backdrop is mixed, but there are some core themes that continue to dominate. Firstly, as the oil price continues to push to the topside, countries that are either minded (or independently mandated) to react to rising price pressures are continuing to see a strong currency as a result of rising rate expectations (GBP, NOK and EUR the most notable beneficiaries). Secondly, the risk status of the global economic backdrop is a key driver, with the current ‘risk on’ status benefitting those currencies with a yield advantage (most notably AUD, in the major FX space). Lastly, but in my mind the most notable in terms of it being a core fundamental backdrop to currency trading in the medium term, is the reserve allocation dynamic and the shift away from USD. We have regularly mooted the themes of differentiation on this blog, as the global economy moves back into recovery and monetary policy normalisation begins in earnest. We now feel this is the right time to begin to position for these themes.

More on this over coming days, but we strongly believe that we are about to enter a period of very significant opportunity for FX rate moves.

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The threat of extreme volatility came with more of a whimper than a bang over the weekend as it seems positioning was perhaps lighter than expected and the deteriorating developments in the Middle East and North Africa (MENA) conflicted with more promising developments in Japan.

The early trading in financial markets this week (muted by a market holiday in Japan) has seen ‘risk on’ trades being the main theme as equity markets stabilise around the globe. Carry is a predominant focus as perceptions of monetary policy differentiations widen, with Japanese (and likely US) rates seen as likely to stay lower for longer. This will likely be exacerbated as the week progresses, as UK CPI data tomorrow and eurozone business sentiment surveys draw attention back to the requirement for the BoE and ECB to defend price stability over the coming months.

Growing concerns in the MENA region, however, have driven the oil price higher and, with this ‘risk off’ spectre in the background, we are likely to see more of a two-way market today as extremes will be utilised to set new and counter-trend positions.

There is little on the data calendar today for the market to focus on. However, this week is very important for the UK and for GBP. As mentioned above, tomorrow’s CPI will be a core focus with the headline rate almost certainly continuing its ascent deeper into ‘letter writing’ territory for the BoE Governor. Hot on the heels of the inflation data this week we have UK public sector finances and retail sales, not to mention the budget.

Pre-amble to this weeks budget has already begun in earnest, with Chancellor Osborne holding firm to his previous commitments stating, “Britain would risk its economic stability if it watered down its programme of tax rises and spending cuts”.

Today is likely a day of reflection, with a growing number of geopolitical and socioeconomic focal points, but activity and clarity are likely to increase significantly as the week progresses.

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Last night the G7 issued a statement from an emergency conference call in response to the crisis in Japan.

“We express our solidarity with the Japanese people in these difficult times, our readiness to provide any needed cooperation and our confidence in the resilience of the Japanese economy and financial sector.

“In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the United States, the United Kingdom, Canada, and the European Central Bank will join with Japan, on March 18, 2011, in concerted intervention in exchange markets. As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will monitor exchange markets closely and will cooperate as appropriate.”

The ensuing currency intervention that has seen JPY selling by the Japanese, UK, French, German, Italian and European central banks (and we anticipate the US to come) has caused a sharp reversal of the JPY appreciation of yesterday.

In addition to this, the escalating global tensions surrounding the situation in Libya (and more broadly throughout the Middle East and North Africa) has added to the nervousness and volatility across financial markets. With no US data to focus the attention on this afternoon, global sentiment and JPY intervention (or lack of) will dominate the proceedings.

Following on from our growing concerns of heightened volatility in blogs this week, we have closed all risk positions and await a more stable geopolitical environment and greater risk reward before re-entering the market, as we expect uncertainty and volatile conditions to escalate into the weekend.

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The end of the NY trading session last night saw volatility in FX that we have not seen for a long time.  USDJPY saw some huge capitulation flows as the cross traded through the 25 year lows at 79.75 taking it down to a low of 76.36.  This spurred large scale ‘risk off’ trading with USDCHF hitting a new lifetime low of 0.8911.

The scale of volatility has left the markets nervous and tentative in its position taking.  Equities are showing early signs of a bounce but remain very contingent on the developments at the Fukushima nuclear facility and differing opinion from energy experts across the globe are adding to the confusion and volatility. 

Whilst the situation in Japan is still uncertain the growing tensions in the Middle East continue to take a back seat in terms of column inches and market importance.  This dynamic is likely to revert once we begin to see some resolution of the Japanese concerns but for now Japan (and for the FX markets the JPY) remains the dominant driver.  As we mentioned yesterday the movement over the last couple of days has the capacity to drive a much broader position squaring across all asset classes and as a result we would express caution in all well ‘owned’ assets.

The Swiss National bank met this morning in its scheduled monetary policy meeting and whilst they were far from explicit in mentioning the recent safe haven appreciation of the CHF, this would likely have tempered their hawkishness at the current juncture.  The SNB raised their growth forecasts for 2011 and outlined the encouraging global economic outlook, whilst giving a gentle reminder to the markets that the trade weighted external value of the CHF FX remains high.

Over the rest of this week and into next week we see continued volatility in financial markets and whilst this will likely be two way volatility from the current point in time I would expect risk aversion and a further exit from ‘risk assets’ to dominate going into next week.

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The bounce in Japanese equities overnight has reduced the overall nervousness a touch. However, the net 10% slide over the past three days and the ongoing uncertainty over the developments at the Fukushima nuclear facility mean that traders are watching the headlines closely and investors are likely to wait for greater certainty before stepping back into equities and ‘risk’ assets.

On that basis, equities are still vulnerable in the short term and, while short squeezes on positions that are looking to take advantage of the negative risk tone of the markets are likely, range trading seems the most likely environment until we can be certain enough about the containment of the domino effects of the natural disaster.

Over the last couple of sessions, the expectations of interest rate hikes in the UK and Europe have been pared back as it is assumed global concerns may instil a ‘wait and see’ response from policy makers. The narrowing of the yield differentials between both UK and Europe versus the US has also contributed to the potential establishment of near-term range trading. However, in the bigger picture, as was suggested by BoE Governor Mervyn King overnight, “real long-term rates are unsustainably low” and the tightening cycle will commence soon.

In the US overnight, the FOMC was mildly bullish from an economic standpoint, tentatively acknowledging improvements in growth momentum and employment. Yet it kept a modest dovish bias in its intention to maintain QE2 bond purchases until mid-year, also keeping the “extended period” language. Whilst US real rates remain negative, the underlying trend for USD will be down.

In the UK this morning, the headline unemployment data was on the high side of expectations, showing jobless claims falling 10.2k in February. However, the broader International Labour Organisation (ILO) measure (for the three months to January including those looking for work but not claiming benefits) showed a 27k rise in unemployment, taking the rate to 8.0%.

Volumes in FX remain very light and, in the same vein as the cautious equity investor, foreign exchange views are waiting for further confirmation before being expressed. As a lead indicator, the US equity market performance this afternoon is likely the major influence on broader financial market sentiment.

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The dominant theme of financial markets continues to be the knock-on effects from the Japanese earthquake and ensuing potential nuclear radiation threat. The uncertainty surrounding these developments is causing widespread position-squaring and a very clear ‘risk off’ profile to proceedings.

Overnight, the Nikkei 225 closed down 10.55%, its biggest one day loss since 1987, as the scale of the ramifications on trade and industry spurred a mass exit from the equity markets which has spread across the globe. There is a concern that the losses incurred in equities over the last couple of days may force the squaring of other ‘risk’ positions across broader financial markets and, to that end, it is important to keep trading parameters tight in this environment of significantly increased uncertainty and volatility.

In FX terms, the ‘risk off’ trade has been just as clear, with the risk positive currencies (such as AUD and, to a lesser degree, GBP and EUR) suffering. AUD has declined over 2% on the day, while safe haven currencies such as CHF, JPY and USD have been bought aggressively from the Tokyo open last night.

There is also a significant impact for monetary policy across the globe. The emergency Bank of Japan meeting on Monday saw the bank increase the supply of liquidity to the market to the tune of JPY15 trillion and further emergency measures can likely be expected in the short term to maintain liquidity and to support both equity and currency markets.

In the US, the FOMC meeting this evening is likely to express a note of caution amid the downturn in equities and, as stocks move lower, the Fed will be more inclined to at least maintain QE2 (in a continued decline, discussions over the QE3 are likely to re-emerge). In the eurozone and the UK, interest rate hike expectations have also been pared back as uncertainty mutes the implied urgency of rate hikes to tame inflation, at least until the impact on consumer and business confidence can be more reliably gauged over the coming days and weeks.

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Whilst not wishing to play down the socio-economic impact and cost of the events in Japan over the last couple of days, the core focus of major financial markets at the start of this week is the expansion of the European Financial Stability Fund (EFSF) and the improvement of the terms of the bail-out loan to Greece (albeit in a heightened risk environment). Greece has been granted an extension to the duration of the loan (from three years to seven and a half years) and reduced the interest rate payable on the loan by 100bps.

There was no change to the terms of the emergency lending to Ireland as there remains criticism within the euro area of Ireland’s reluctance to raise the level of its corporate tax, designed to boost the attractiveness of Ireland to international business. In fact, French President Sarkozy went as far as to state that, “we can’t ask others to pay for Ireland’s low taxes”.

The commitment of the eurozone to ‘do what is needed’ to ensure the stability of the area was echoed again this morning by Luxemberg’s Juncker and this is likely to further support EUR on FX markets, as peripheral spreads narrow and sentiment improves behind a united euro area leadership. The litmus test for the market (in terms of the credibility and comprehensiveness of the eurozone’s solutions) will come at the 24th/25th March eurozone summit. Until then, EUR will likely have a mild positive bias.

Commodity markets are much less clear, however. The disaster in Japan has put pressure on the downside of oil markets as usage in Japan is likely to fall off dramatically as industry halts production. However, while the Middle East concerns have been pushed from the front page, the troubles have far from diminished. There were numerous reports of social unrest, clashes and battles for control across the region over the weekend. This geopolitical environment means that there are potential risks to the oil price, which could move sharply in either direction.

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Risk aversion is growing into the week’s close. A sell-off in equities in the US led Asian and European markets lower this morning. Oil and metals prices also declined sharply in afternoon trading yesterday as positions were unwound after solid gains during a week that was very light on economic data flow.

The earthquake in Japan overnight has further dented investor confidence and extended the risk aversion, driving ‘safe haven’ JPY buying as Japanese investors bring their money home and this has been the dominant theme of today’s early trading.

In addition to the broader market concerns over the global economic backdrop, the downgrade of Spanish debt yesterday has brought further confusion and debate over the health of the Spanish banking sector. In downgrading Spanish sovereign debt ratings yesterday, Moody’s explicitly expressed a concern over the Spanish banks, estimating a shortfall of €40-50 billion. Later in the day, Fitch ratings agency stated that they saw the Spanish banking shortfall at €38 billion, yet the official release from the Bank of Spain stated the shortfall at just €15.15 billion, also naming 12 banks that are required to raise capital.

Closing levels today will be watched very closely by financial markets and will likely define sentiment for next week. USD has staged a strong rebound from the lows at the end of last week, but this has been driven by a change in sentiment to risk. The longer-term concerns (namely negative real US rates, an increasing desire from (predominantly Asian) reserve managers to diversify away from high percentage USD holdings, and a monetary cycle that will lag the eurozone and UK cycles) all remain and the trade-off between short- and long-term drivers is at an important juncture. More on this next week.

Have a great weekend.

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Differentiation in the eurozone has emerged as the dominant theme in early trading today as Moody’s downgraded Spain’s rating from Aa1 to Aa2 (maintaining a negative outlook). Moody’s reasoning cited expectations of further increases in the public debt ratio, continued concerns over the Caja’s recapitalisation and an estimated Spanish bank shortfall of €40-50 billion. The rating agency also downgraded the bank rescue fund (FROB).

Peripheral yield spreads have widened further on the downgrade and Greek 2-year yields have risen above 17%, after the IMF chief economist suggested last night that Greece cannot afford 16% debt. However, French industrial production data and Austrian Q4 GDP highlight continued strength in the core eurozone economies.

Disappointing Chinese trade data (showing a deficit of $7.9 billion in February from an expected $4.9 billion surplus), and a greater-than-expected cut in interest rates from the central bank of New Zealand, have also shifted the balance back towards differentiation and risk aversion from the inflation focus that primarily dominated recent proceedings.

For the UK, the Spanish downgrade brings a focus back on the banking sector. The UK’s dependence on financial services as a contribution to GDP means GBP has been vulnerable. The BoE MPC announces rates at midday today and, while the market has priced in (approximately) a 10% chance of a move at today’s meeting, the true likelihood of a change in policy is much smaller than that implied by the markets. Two surveys over the last two days have shown that second round effects are well contained (one even showing that factories reduced salaries in the three months to February, the first reduction since 2004). Hence, the MPC will likely be inclined to continue to wait for the inflation report in May before entering the rate normalisation process.

The reality of the differentiation/inflation focus of markets is that rate normalisation is inevitable. Even Greece, with the highest borrowing costs of the major economies, would find some benefit in higher rates to curb an inflation rate which is currently running at over twice the ECB mandate (at 4.3% year on year). Inflation focus will come back to the fore and monetary policy will be tightened across the major economies lead by the eurozone and the UK. Continued question marks about the long-term asset allocation of Asian central banks away from USD will also be a long-term negative and, in that regard, this morning’s rally in USD may well prove an opportunity to sell.

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With a continued lack of first tier data in the calendar for today, the market focus has been driven by two core themes – differentiation and inflation.

In the case of the eurozone, the market is currently struggling to prioritise the relative dominance of these two (in relation to EUR) opposing arguments.

Over the past couple of months, eurozone policy makers have been united in their commitment (or at least their statement of intent) to do whatever is needed to safeguard the stability and prosperity of the monetary union. The rhetoric has been focussed on the EcoFin summit on 24/25 March yet, in the light of Monday’s triple-notch downgrade of Greek sovereign debt by Moody’s (from Ba1 to B1), the confidence in the expectation of a panacea to cure all eurozone woes emanating from this meeting have been tested.

Following on from the Greek downgrade, the periphery is once again under pressure. Greek, Irish and Portuguese debt yields are currently at levels that are both unsustainable and non-financeable by the respective governments. Ultimately, the refinancing of Greek and Irish debt looks inevitable at some point.

However, while the periphery continues to struggle, the core remains strong. Germany, once dubbed the ‘sick man of Europe’, is thriving and its expansion appears to be broadening. The key concern for the core countries at the moment is inflation. Fear of rising expectations and second round effects mean that a rate rise is highly likely next month.

The growing disparity within the eurozone may lead to differentiation of policy or a further expansion of Mr Trichet’s ‘separation principle’. This may encompass renegotiation of the terms of the Irish and Greek bail-outs; it may even extend the bail-out to Portugal. The commitment to fund the periphery will likely be strong. EUR has wobbled over the last couple of days after conquering the 1.40 level against USD, yet, despite the periphery concerns, inflation will remain the near-term focus and EUR should continue to be supported.

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First tier economic data or events were absent from the calendar yesterday and today is no different. With the lack of a defined focal point, financial markets are liable to drift as sentiment ebbs and flows and, while interest rates, equities and FX generally continue to hold historic correlations, the driver of these inter-correlations becomes blurred.

The opening session to the week, coming on the back of some negative UK press over the weekend, followed the theme of profit-taking (in short USD positions), followed by renewed selling as the geopolitical issues came back to the fore and the oil price spiked to a new 18-month high. As the day progressed, however, USD selling had failed to make any significant progress to the downside and profit-taking once again came to the fore.

The big news of the day then emerged, as the UK Treasury announced the successor to the Monetary Policy Committee’s arch-hawk, Andrew Sentance. The mere reminder of Mr Sentance’s departure took the shine off GBP as the most vocal proponent of aggressive conventional monetary tightening will now have just two more meetings to argue his corner, with the May meeting (likely his swan song) bringing the first (albeit probably less aggressive than he would wish) rate hike in the cycle.

The replacement member at this critical juncture is Ben Broadbent. Mr Broadbent’s recently published research argues that the economy is potentially much stronger than some central forecasts (read Mervyn King) have assumed. He states (in his role as Goldman Sachs economist) that, “we take a more sanguine view of its [government austerity] impact over the medium term.” While Mr Broadbent does not entirely fill the ultra hawkish shoes of Andrew Sentance, he will likely maintain the current balance on the MPC, with further ‘wait and see’ members joining the hawks over coming meetings.

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As the situation in the Middle East and North Africa (MENA) continues to deteriorate, the rising oil and commodity price effects are the primary concern for central banks, governments and financial markets alike.

Chancellor Osborne was quoted over the weekend as saying that he is doing everything he can to help British families weather the impact of rising oil prices. However, in doing so, he stated clearly that he won’t take risks with economic stability. Herein lies the global problem. Central banks and governments are keenly aware of the need for fiscal austerity. Yet, at a time when the global economy is still in a nascent state of repair from the financial and economic crises of the last couple of years, the threat of additional inflation from energy price shocks adds further complication to both fiscal and monetary policy.

However, in the short term at least, the focus of foreign exchange markets is clearly defined. While rising oil prices are a structural negative for growth prospects around the globe, they are adding to inflationary pressures. Those central banks (the eurozone, UK, Canada and the predominance of the emerging world) that are now minded to raise rates as insurance against rising inflationary pressures continue to benefit. The US, however, is still in the process of easing monetary policy (in the form of continuing QE2) whilst experiencing lower inflationary pressures (at the moment!) and, as such, is the biggest loser.

With no data of note for the markets to focus on today the events in MENA and the derivative impact on the oil and commodity prices will be the predominant driver of sentiment and flow.

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The main focus of the day is undoubtedly this afternoon’s announcement from the ECB. While the rate announcement is most likely to pass with the base rate unchanged at 1.00%, the attention of the markets will be on the chosen phraseology of ECB president Trichet in regard to the rising threat of inflation. With this morning’s eurozone GDP data showing a broadening of the recovery profile – admittedly ahead of fiscal and monetary tightening to come – and despite a growing disparity between the core and periphery, increasingly there are reasons to expect a shift towards normalisation of policy over the coming months.

However, I feel that it is too early to expect any explicit indications from M Trichet that rates are about to rise imminently and, in this regard, the market may have got ahead of itself. The president is likely to signal further unwinding of non-conventional policy and ‘open the door’ for possible rate rises in the second half of 2011.

EUR has been very buoyant over recent weeks and, with the potential for disappointment in the extent of the hawkishness of this afternoon’s announcement and the increased likelihood of a strong US employment report tomorrow, the market may well be provided with a good opportunity to buy EUR at better levels. GBP may offer similar value after a weak services sector survey release this morning.

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