UK industrial production down - Sterling stable

Today's Highlights

• PBOC stabilizes Yuan

• UK industrial production down - Sterling stable

• EU industrial production awaiting

FX Market Overview

The markets stabilised a little yesterday as the People’s Bank of China kept their daily CNY to USD fix for another session. Given the volatility earlier in the week, this calm was quite welcome. To be fair, this 'fix' on that exchange rate has little to do with the markets and everything to do with the PBOC trying to manipulate sentiment but that is by-the-bye. Overnight news from China brought improved trade data. That was convenient. Nonetheless, this improved trader sentiment towards China's suppliers and we have seen the Aussie and Kiwi Dollars improve slightly in early trade.

Sterling had another fraught day after UK industrial production fell 0.7% in the month of November. That was much worse than forecast and it unsettled Sterling traders. However, it was a November figure and we are a couple of months on from that, so perhaps the impact was lessened as a result. The Office for National Statistics said we needed to see a 0.5% rise in December if the Q4 data was to remain flat. I doubt that will happen so Sterling may well have a very poor day this time in February. The fact that there is virtually no UK news today will probably allow the Pound room to dawdle along in its current sorry state.

Oil prices bounced a little from their lows yesterday but we are still seeing prices around $30 a barrel and that is a full $110 a barrel less than it was at the peak in 2008 and back at prices not seen since 2004. The dampening effect this will have on inflation across the globe does suggest the US interest rate hike may have been premature and we may see an extended delay before the next. It also delays the likely date of any UK interest rate hike and that appears to be pressing down on the value of the Pound.

Other than Eurozone industrial production (forecast to be weak) there is only the US Beige Book to look out for today. The Dollar didn't react to President Obama's last State of the Union address but why would it? However, as the Beige Book forms part of the agenda for the next Federal Reserve Open Market Committee meeting, it has the potential to weaken the USD. The regional Federal Reserve Districts also hint concerns over the labour market, inflation and economic growth. We'll know all of that at 7pm UK time.

The Daily Express is also showing a photograph taken by German photographer Birk Mobius who sounds like a character from the Matrix. Either way, the picture is of an aeroplane being struck by lightning as it flies through a rainbow. I think the odds of getting that shot at precisely the right time from precisely the right angle and with the right camera are about the same as winning the National Lottery these days.