IN THE UK

Political pressures weighed on the pound again as an opinion poll released over the weekend suggested that the result of a general election in June would probably be a hung parliament. With the financial position of the UK being so weak, split decisions in parliament would result in an inability to make a firm decision on monetary policy which may elongate the recovery of the economy.

On a brighter note, UK manufacturing activity came in way over consensus at 56.7 instead of the expected 54.1. Mortgage approvals were disappointingly down from estimates of 62,000 to just over 59,000. This may well be due to the Christmas period and an issue with supply and demand as the number of new properties being advertised is reduced.

The highlight of the UK calendar this week is the Bank of England’s policy meeting on Thursday. Again interest rates are likely to be left on hold at 0.5%, however we could see the end of the quantitative easing programme which currently sits at £200bn. Expect an increase in sterling sell offs if QE is extended. 

IN THE US

The US dollar made gains as the US Institute for Supply Management’s manufacturing index came in above consensus at 58.4 in January. This sparked cable to fall to its lowest level this year to $1.5850 before slightly rising to just over 1.59.

US stocks rose across the board after the manufacturing data and positive earnings results from the US’s largest oil company - Exxon Mobil, bringing to an end the worst month for stocks in almost a year.

President Obama made a plea to both Republicans and Democrats to “seriously consider” the extensive over spending on unnecessary projects and to review even the most genuine of causes in a bid to try and save 1.5 trillion dollars.

IN THE EU

The Individual nations of Germany and Switzerland both posted higher than expected PMI manufacturing figures of 53.7 over 53.4 and 56.0 over 55.4 respectively. Despite the worries of Greece, Spain and Portugal the Euro-zone as a whole posted PMI figures of 52.4 instead of the expected 52.0.

Any figure above 50 shows expansion and with posted figures over estimate this helps diffuse the argument that the weaker EU states are bringing the averages down. The euro was helped along by just under 1.0% from Friday at €1.1441 against the pound.

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