GJ Quick update

H1 & daily look bullish divergence, but at TF H4 look bearish divergence.. I thing price will moving down shortly before climb up to hit 212.xx.. GBP look strong at news...

Forex - Pound jumps after very strong UK retail sales

LONDON (Thomson Financial) - The pound strengthened after very strong UK retail sales data suggested UK high street activity is much more buoyant than previously thought.

The Office for National Statistics revealed that retail sales in January were up 0.8 pct higher on a seasonally-adjusted basis from February, when retail sales fell by 0.2 pct.

January's performance beat expectations for a 0.2 pct monthly rise, and helped the annual rate double in January to 5.6 pct, again beating analysts' forecasts of a 4.8 pct increase.

'The pound continues to benefit from January's forecast-busting UK retail sales figures,' said Robert Howard at Thomson IFR Markets.

The news will allay fears of an imminent slowdown in the UK economy, and keep in place expectations that though there appears to be room for the Bank of England's Monetary Policy Committee to cut interest rates further, it will do so gradually rather than aggressively.

'Today's release perhaps reinforces why the BoE envisages a more gradual easing in monetary policy than markets,' said David Page, UK economist at Investec.

The euro had earlier traded close to its all time high against the pound following yesterday's dovish minutes from the MPC's Feb 7 meeting, which had revealed the committee voted 8-1 for a quarter point cut, with one dissenting vote from arch-dove David Blanchflower for a bolder half point reduction.

However, the single currency quickly lost its footing following today's UK data, and weakened further after the European Commission slashed its growth forecast for the euro zone, although it hiked its inflation outlook from its previous estimates published in November.

It also said that the risks it warned of in November have materialised resulting in an 'unusually uncertain' global economic situation.

Elsewhere, the dollar recovered slightly, but remained on the backfoot as market players continued to digest yesterday's minutes to the Federal Reserve's Jan 30 rate setting meeting, which saw interest rates cut by a half point to 3.00 pct.

Fears had arisen yesterday that the Fed would be constrained from cutting interest rates aggressively to support growth, after US CPI data released yesterday showed a faster-than-expected rise in inflation for January.

Those concerns were dispelled when the Fed released its minutes, which seemed to suggest there is still room for more rate cuts despite rising inflationary pressures.

'Having now absorbed the FOMC's deliberations, the Fed funds futures market remains firmly of the view that interest rates could well be cut by 50 basis point next month and by a further 25 basis points in the months thereafter,' said Simon Derrick, currency strategist at Bank of New York.

Looking ahead, the Philadelphia Fed survey of manufacturers will be of interest.

The index is expected to increase in February to a level of -12.0 from -20.9 in the previous month.

'If this survey stays as weak - or falls further - it will raise fears that the other surveys will follow the Philly Fed survey down and, of course, raise concerns that the US is in recession,' said Steve Barrow, chief currency strategist at Bear Stearns.

London 1303 GMT London 0922 GMT

US dollar

yen 108.15 up from 107.98

sfr 1.1004 up from 1.0971

Euro

usd 1.4733 down from 1.4746

stg 0.7526 down from 0.7568

sfr 1.6215 up from 1.6177

yen 159.35 up from 159.29

Sterling

usd 1.9579 up from 1.9475

yen 211.69 up from 210.41

sfr 2.1537 up from 2.1366

Australian dollar

usd 0.9194 up from 0.9186

stg 0.4695 down from 0.4715

yen 99.42 up from 99.22

chinny.li@thomson.com

cml/ajb

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