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Not too much to report today in relation to economic data with the focus looking forward to tomorrows interest rate decisions from the Bank Of England and the European Central Bank. There is a possibility that the completion of the Quantitative Easing programme will be announced for the UK- however the ever cautious MPC will likely leave the door open for more if deemed necessary. Either way a pause or a cessation in QE should be largely beneficial for sterling in the short term. The statements following the respective decisions from the BoE and ECB will again be the highlight as future policy sentiment will be predicted by the markets.

Sterling had a bright start today against the USD pushing back through 1.60 and hitting a high of 1.6069 before slumping back to earlier levels. Reports of Asian Central banks buying GBP/USD earlier before the rally was sold back lower. EUR/USD also stuck its neck back above 1.40 again this morning to a high of 1.4026 before falling back to 1.40. Later today we get feedback on employment conditions in the US with ADP employment change. We also have PMI services data from most major economies today and the markets will want to see a good number to reflect the positive manufacturing PMI levels earlier this week. Basically the markets in the last week have been trading in the risk on and off pattern with the lean to risk off which has seen pronounced strength in the USD and the JPY. So far this week we are leaning slowly back towards risk on and if this gathers momentum we could see GBP/USD and EUR/USD move higher as well as the Yen losing ground and gains in commodity currencies.

Yesterday we had the NIESR report which warned of dangers of too rapid a return to fiscal tightening but overall was not too downbeat. This morning we have had UK Nationwide consumer confidence which showed a 3 point rise but indicated that the UK consumers spending patterns are still less than normal for the start of the year.

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