The BoE stunned financial markets and City economists as it raised interest rates to 5.25 per cent. The aim of this was to try and cool the booming housing market as three rate rises in five months have pushed the monthly repayments on variable rate mortgages.

GBP

The Central Bank is evidently concerned about inflationary pressures which is the main reason for the rate hike. The rate raise was the first time since June 2004 that the Bank of England had changed the rates outside of its quarterly pattern of inflation reports.

USD

US retail sales, excluding autos, are expected to rise by 0.6 per cent compared with a one per cent rise in November. These figures would lend further support to the dollar, after making good ground on the euro.

EUR

The euro fell to an 18-month low against the sterling and hit its lowest level since late November against the dollar as the market digested the news that the eurozone would keep interest rates on hold at 3.5 per cent.

JPY

Japan Chief Cabinet Secretary Yasuhisa Shiitake claimed that the "economy is an expanding trend despite weakness in consumption". This reveals the difficulty being faced by the BoJ in assessing whether to keep interest rates on hold or raise them further.

Compiled by Gerald De Giovanni, Commercial Foreign Exchange Travelex Malta (Free phone: 800 77 33 22) www.travelex.com.mt

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