In the UK, GfK consumer sentiment figures released dropped to 22-month lows and will not offer support for sterling. The main focus will be on US Q4 GDP data. The advanced reading of growth is expected to be helped by strong consumer demand. Stronger demand was noted in this week’s FOMC statement on monetary policy, but the Fed also said that going forward demand faced headwinds from a weak labour market. The euro found support from comments by Prime Minister Nicholas Sarkozy.

Sterling

The GfK consumer confidence index came out at -29 for the month of January marking a considerable drop from the prior month’s release of -21. Indeed the reading on confidence is the lowest in 22 months and certainly reflects consumer concerns over the VAT increase as well as cuts in government spending.

US dollar

The economic data released was not all that inspiring for dollar bulls. The weekly jobless claims jumped by 50k far surpassing expectations at 454k. Durable goods orders also registered heavy declines of 2.5 per cent. A Midwest manufacturing index dropped from 21 in the prior month to 11, which does not bode well for next week’s ISM manufacturing survey. The only figures that were positive in the US were pending home sales that were up 2.0 per cent beating market forecasts of a one per cent rise.

Euro

The lending capacity of the EFSF will be increased and the facility will become more flexible according to comments made from European Economics Minister, Olli Rehn. He also said that the amount that the facility guarantees will not be increased from its current €440 billion. The bailout facility is expected to become a permanent fund in June and further decisions regarding its usefulness are expected to be made at a summit late in March. The comments should continue to provide support for the euro, which saw gains when the French Prime Minister said “we will never abandon” the euro.

Japanese yen

The Japanese yen is sharply higher after getting pummelled when S&P, a rating agency, announced a credit rating downgrade of Japanese government bonds. Government officials have been out saying that fiscal discipline will be administered in hopes to ease investor concern over further downgrades.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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