Sterling continued its run against the US dollar yesterday, hitting a high of $1.6276/£1 after services PMI data came in stronger than expected indicating strong services sector activity. With this week’s better than expected manufacturing, construction and now services figures; the case for an interest rate hike has returned. Comments from Bank of England policy makers this week have also given rise to an expectation of further hikes – especially if commodity prices remain high. Sterling is likely to remain well supported against the US dollar – especially ahead of next week’s Bank of England meeting. The outlook against the euro is a bit more mixed, with flow related to the debt crisis and risk appetite keeping sterling on its toes. Out today, we have already seen better than expected house prices so call in now for a live exchange rate.

In the euro zone, yesterday saw the European Central Bank’s interest rate decision. The bank kept interest rates on hold and disappointed many investors who were expecting a more upbeat press conference from Bank President Jean-Claude Trichet. There had been warnings in the last few weeks over inflation in the region and as a result, many had been expecting talk of interest rate hikes. The euro fell by 2 cents against the US dollar on the day as traders sold the euro in disappointment. Out today, there is some Italian inflation data so call in now for a live exchange rate.

In the USA, the US dollar is set for a big day with Non-Farm payroll figures released this afternoon. Economists are expecting 140,000 new jobs to be added to the economy in January and the figure can cause a lot of volatility so ensure you speak to one of the traders to avoid losing out if there is significant movement.

Elsewhere, the Reserve Bank of Australia raised its 2011 growth outlook and inflation forecasts which saw the Australian dollar strengthen. Importantly this is despite the flooding in Queensland and a potential slowdown in China, so the markets reacted positively.

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