- S&P lowers Ireland rating to A-/A-2 from A-/A-1; Still on watch negative. Expects to review its’ Ireland rating again by April
- BOE’s Sentance: Need to be prepared to look through GDP fluctuations during recovery. The longer BOE takes no action against CPI, the bigger the threat to its credibility
- BOE’s Bean: Would have to raise interest rates if spike in oil prices persists, and we concluded inflation was becoming embedded
- UK construction PMI 53.7 in January, much stronger than median forecast of 49.9 (Cable already bid spikes over 1.6200 on the news)
- IFS think-tank: UK government borrowing in 2010-2011 to undershoot forecast. Warns against budget giveaway
- Egyptian armed forces: People need to look to future and think about country. People’s message delivered already
- Egyptian opposition: Calls for big protest on Friday to demand Mubarak go now
- German government source: EU summit must give signal for stronger coordination of economic goveranance in euro zone
- China is poised to raise rates again, bankers say – New York Times
- Iceland CBank cuts key interest rate to 4.25% from 4.50%
- Spain’s January jobless 4.23 mln, up 3.2% from December
- BOJ’s Dep Gov Iwata: Japan unlikely to escape deflation at least through 2012/2013
- Yemen President: Will not seek to extend his presidential term, or pass power to son. Yemen’s opposition Islah party says rally on Thursday stands to go on as planned
Sterling had a decent morning. Cable up at 1.6195 from early 1.6165, EUR/GBP down at .8520 from around .8565. Hawkish comments from MPC members Sentance and Bean (see above) plus much stronger than expected construction PMI were pluses for sterling.
Cable ran into selling from Middle Eastern and Asian sovereigns below 1.6200, which slowed but didn’t stop the early ascent as the market concentrated on the Sentance/Bean comments. The stronger than expected PMI data sent us spiking over 1.6200 on way to session high 1.6229. The late morning slump in EUR/USD then caused cable to drift lower.
EUR/USD down at 1.3795 from early 1.3845. Strong Middle Eastern selling helped negate any meaningful rally. We stood around 1.3830 when wires carried S&P downgrade of Ireland. After a slight pause we slid below 1.3800, reaching session low 1.3889 before steadying.
USD/JPY effectively unchanged at 81.47. Talk of Kampo down at 81.25/35 has lent some tenuous support.
